Correlation Between Novavax and Lexicon Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Novavax and Lexicon Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Novavax and Lexicon Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novavax and Lexicon Pharmaceuticals, you can compare the effects of market volatilities on Novavax and Lexicon Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Novavax with a short position of Lexicon Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novavax and Lexicon Pharmaceuticals.
Diversification Opportunities for Novavax and Lexicon Pharmaceuticals
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Novavax and Lexicon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Novavax and Lexicon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexicon Pharmaceuticals and Novavax is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Novavax are associated (or correlated) with Lexicon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexicon Pharmaceuticals has no effect on the direction of Novavax i.e., Novavax and Lexicon Pharmaceuticals go up and down completely randomly.
Pair Corralation between Novavax and Lexicon Pharmaceuticals
Given the investment horizon of 90 days Novavax is expected to generate 0.51 times more return on investment than Lexicon Pharmaceuticals. However, Novavax is 1.95 times less risky than Lexicon Pharmaceuticals. It trades about -0.11 of its potential returns per unit of risk. Lexicon Pharmaceuticals is currently generating about -0.39 per unit of risk. If you would invest 984.00 in Novavax on August 31, 2024 and sell it today you would lose (122.00) from holding Novavax or give up 12.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novavax vs. Lexicon Pharmaceuticals
Performance |
| Timeline |
| Novavax |
| Lexicon Pharmaceuticals |
Novavax and Lexicon Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novavax and Lexicon Pharmaceuticals
The main advantage of trading using opposite Novavax and Lexicon Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novavax position performs unexpectedly, Lexicon Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lexicon Pharmaceuticals will offset losses from the drop in Lexicon Pharmaceuticals' long position.The idea behind Novavax and Lexicon Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Lexicon Pharmaceuticals vs. BioLineRx | Lexicon Pharmaceuticals vs. Ardelyx | Lexicon Pharmaceuticals vs. Seres Therapeutics | Lexicon Pharmaceuticals vs. Immunitybio |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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