Correlation Between Ligand Pharms and American Airlines
Can any of the company-specific risk be diversified away by investing in both Ligand Pharms and American Airlines 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 Ligand Pharms and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ligand Pharms Glucagon and American Airlines Group, you can compare the effects of market volatilities on Ligand Pharms and American Airlines 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 Ligand Pharms with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligand Pharms and American Airlines.
Diversification Opportunities for Ligand Pharms and American Airlines
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ligand and American is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ligand Pharms Glucagon and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Ligand Pharms 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 Ligand Pharms Glucagon are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Ligand Pharms i.e., Ligand Pharms and American Airlines go up and down completely randomly.
Pair Corralation between Ligand Pharms and American Airlines
Assuming the 90 days horizon Ligand Pharms Glucagon is expected to generate 14.82 times more return on investment than American Airlines. However, Ligand Pharms is 14.82 times more volatile than American Airlines Group. It trades about 0.71 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.11 per unit of risk. If you would invest 0.19 in Ligand Pharms Glucagon on January 26, 2024 and sell it today you would earn a total of 0.11 from holding Ligand Pharms Glucagon or generate 57.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 9.52% |
| Values | Daily Returns |
Ligand Pharms Glucagon vs. American Airlines Group
Performance |
| Timeline |
| Ligand Pharms Glucagon |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| American Airlines |
Ligand Pharms and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ligand Pharms and American Airlines
The main advantage of trading using opposite Ligand Pharms and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ligand Pharms position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Ligand Pharms vs. Niagara Mohawk Power | Ligand Pharms vs. The Siam Cement | Ligand Pharms vs. Oaktree Capital Group |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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