Correlation Between Verrica Pharmaceuticals and Viking Therapeutics
Can any of the company-specific risk be diversified away by investing in both Verrica Pharmaceuticals and Viking Therapeutics 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 Verrica Pharmaceuticals and Viking Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verrica Pharmaceuticals and Viking Therapeutics, you can compare the effects of market volatilities on Verrica Pharmaceuticals and Viking Therapeutics 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 Verrica Pharmaceuticals with a short position of Viking Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verrica Pharmaceuticals and Viking Therapeutics.
Diversification Opportunities for Verrica Pharmaceuticals and Viking Therapeutics
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Verrica and Viking is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Verrica Pharmaceuticals and Viking Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viking Therapeutics and Verrica Pharmaceuticals 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 Verrica Pharmaceuticals are associated (or correlated) with Viking Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viking Therapeutics has no effect on the direction of Verrica Pharmaceuticals i.e., Verrica Pharmaceuticals and Viking Therapeutics go up and down completely randomly.
Pair Corralation between Verrica Pharmaceuticals and Viking Therapeutics
Given the investment horizon of 90 days Verrica Pharmaceuticals is expected to under-perform the Viking Therapeutics. In addition to that, Verrica Pharmaceuticals is 1.93 times more volatile than Viking Therapeutics. It trades about -0.03 of its total potential returns per unit of risk. Viking Therapeutics is currently generating about -0.01 per unit of volatility. If you would invest 5,839 in Viking Therapeutics on September 2, 2024 and sell it today you would lose (545.00) from holding Viking Therapeutics or give up 9.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verrica Pharmaceuticals vs. Viking Therapeutics
Performance |
| Timeline |
| Verrica Pharmaceuticals |
| Viking Therapeutics |
Verrica Pharmaceuticals and Viking Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verrica Pharmaceuticals and Viking Therapeutics
The main advantage of trading using opposite Verrica Pharmaceuticals and Viking Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verrica Pharmaceuticals position performs unexpectedly, Viking Therapeutics 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 Viking Therapeutics will offset losses from the drop in Viking Therapeutics' long position.The idea behind Verrica Pharmaceuticals and Viking Therapeutics 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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