Correlation Between Ligand Pharms and Megaworld Corp
Can any of the company-specific risk be diversified away by investing in both Ligand Pharms and Megaworld Corp 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 Megaworld Corp 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 Megaworld Corp ADR, you can compare the effects of market volatilities on Ligand Pharms and Megaworld Corp 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 Megaworld Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligand Pharms and Megaworld Corp.
Diversification Opportunities for Ligand Pharms and Megaworld Corp
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ligand and Megaworld is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ligand Pharms Glucagon and Megaworld Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megaworld Corp ADR 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 Megaworld Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megaworld Corp ADR has no effect on the direction of Ligand Pharms i.e., Ligand Pharms and Megaworld Corp go up and down completely randomly.
Pair Corralation between Ligand Pharms and Megaworld Corp
Assuming the 90 days horizon Ligand Pharms Glucagon is expected to generate 53.75 times more return on investment than Megaworld Corp. However, Ligand Pharms is 53.75 times more volatile than Megaworld Corp ADR. It trades about 0.19 of its potential returns per unit of risk. Megaworld Corp ADR is currently generating about -0.02 per unit of risk. If you would invest 0.37 in Ligand Pharms Glucagon on January 19, 2024 and sell it today you would lose (0.22) from holding Ligand Pharms Glucagon or give up 59.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 16.87% |
| Values | Daily Returns |
Ligand Pharms Glucagon vs. Megaworld Corp ADR
Performance |
| Timeline |
| Ligand Pharms Glucagon |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Megaworld Corp ADR |
Ligand Pharms and Megaworld Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ligand Pharms and Megaworld Corp
The main advantage of trading using opposite Ligand Pharms and Megaworld Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ligand Pharms position performs unexpectedly, Megaworld Corp 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 Megaworld Corp will offset losses from the drop in Megaworld Corp's long position.| Ligand Pharms vs. Group Ten Metals | Ligand Pharms vs. Ascendant Resources | Ligand Pharms vs. Atico Mining | Ligand Pharms vs. Prime Mining Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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