Correlation Between Verastem and Legend Biotech
Can any of the company-specific risk be diversified away by investing in both Verastem and Legend Biotech 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 Verastem and Legend Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verastem and Legend Biotech Corp, you can compare the effects of market volatilities on Verastem and Legend Biotech 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 Verastem with a short position of Legend Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verastem and Legend Biotech.
Diversification Opportunities for Verastem and Legend Biotech
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Verastem and Legend is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Legend Biotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend Biotech Corp and Verastem 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 Verastem are associated (or correlated) with Legend Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend Biotech Corp has no effect on the direction of Verastem i.e., Verastem and Legend Biotech go up and down completely randomly.
Pair Corralation between Verastem and Legend Biotech
Given the investment horizon of 90 days Verastem is expected to under-perform the Legend Biotech. In addition to that, Verastem is 1.11 times more volatile than Legend Biotech Corp. It trades about -0.05 of its total potential returns per unit of risk. Legend Biotech Corp is currently generating about 0.03 per unit of volatility. If you would invest 3,664 in Legend Biotech Corp on November 27, 2024 and sell it today you would earn a total of 37.00 from holding Legend Biotech Corp or generate 1.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Verastem vs. Legend Biotech Corp
Performance |
Timeline |
Verastem |
Legend Biotech Corp |
Verastem and Legend Biotech Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Verastem and Legend Biotech
The main advantage of trading using opposite Verastem and Legend Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verastem position performs unexpectedly, Legend Biotech 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 Legend Biotech will offset losses from the drop in Legend Biotech's long position.The idea behind Verastem and Legend Biotech Corp 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.Legend Biotech vs. Vaxcyte | ||
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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