Correlation Between Verastem and Legend Biotech

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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

VerastemLegendDiversified AwayVerastemLegendDiversified Away100%
-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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Verastem  vs.  Legend Biotech Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0204060
JavaScript chart by amCharts 3.21.15VSTM LEGN
       Timeline  
Verastem 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Verastem displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.544.555.566.57
Legend Biotech Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Legend Biotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3032343638404244

Verastem and Legend Biotech Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-23.79-17.81-11.84-5.870.06.1712.4518.7225.0 0.010.020.030.04
JavaScript chart by amCharts 3.21.15VSTM LEGN
       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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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