Correlation Between Viking Therapeutics and Biomea Fusion

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Can any of the company-specific risk be diversified away by investing in both Viking Therapeutics and Biomea Fusion 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 Viking Therapeutics and Biomea Fusion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Viking Therapeutics and Biomea Fusion, you can compare the effects of market volatilities on Viking Therapeutics and Biomea Fusion 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 Viking Therapeutics with a short position of Biomea Fusion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viking Therapeutics and Biomea Fusion.

Diversification Opportunities for Viking Therapeutics and Biomea Fusion

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Viking and Biomea is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Viking Therapeutics and Biomea Fusion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomea Fusion and Viking Therapeutics 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 Viking Therapeutics are associated (or correlated) with Biomea Fusion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomea Fusion has no effect on the direction of Viking Therapeutics i.e., Viking Therapeutics and Biomea Fusion go up and down completely randomly.

Pair Corralation between Viking Therapeutics and Biomea Fusion

Given the investment horizon of 90 days Viking Therapeutics is expected to generate 0.77 times more return on investment than Biomea Fusion. However, Viking Therapeutics is 1.3 times less risky than Biomea Fusion. It trades about -0.31 of its potential returns per unit of risk. Biomea Fusion is currently generating about -0.25 per unit of risk. If you would invest  6,297  in Viking Therapeutics on September 12, 2024 and sell it today you would lose (1,376) from holding Viking Therapeutics or give up 21.85% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Viking Therapeutics  vs.  Biomea Fusion

 Performance 
       Timeline  
Viking Therapeutics 

Risk-Adjusted Performance

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Over the last 90 days Viking Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Biomea Fusion 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Biomea Fusion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Viking Therapeutics and Biomea Fusion Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Viking Therapeutics and Biomea Fusion

The main advantage of trading using opposite Viking Therapeutics and Biomea Fusion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viking Therapeutics position performs unexpectedly, Biomea Fusion 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 Biomea Fusion will offset losses from the drop in Biomea Fusion's long position.
The idea behind Viking Therapeutics and Biomea Fusion 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.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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