Correlation Between Ligand Pharmaceuticals and Best Buy

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Can any of the company-specific risk be diversified away by investing in both Ligand Pharmaceuticals and Best Buy 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 Pharmaceuticals and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ligand Pharmaceuticals General and Best Buy Co, you can compare the effects of market volatilities on Ligand Pharmaceuticals and Best Buy 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 Pharmaceuticals with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligand Pharmaceuticals and Best Buy.

Diversification Opportunities for Ligand Pharmaceuticals and Best Buy

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Ligand and Best is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ligand Pharmaceuticals General and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Ligand 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 Ligand Pharmaceuticals General are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Ligand Pharmaceuticals i.e., Ligand Pharmaceuticals and Best Buy go up and down completely randomly.

Pair Corralation between Ligand Pharmaceuticals and Best Buy

Assuming the 90 days horizon Ligand Pharmaceuticals General is expected to generate 65.35 times more return on investment than Best Buy. However, Ligand Pharmaceuticals is 65.35 times more volatile than Best Buy Co. It trades about 0.3 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.08 per unit of risk. If you would invest  0.31  in Ligand Pharmaceuticals General on January 19, 2024 and sell it today you would earn a total of  0.19  from holding Ligand Pharmaceuticals General or generate 61.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy14.52%
ValuesDaily Returns

Ligand Pharmaceuticals General  vs.  Best Buy Co

 Performance 
       Timeline  
Ligand Pharmaceuticals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Solid
Over the last 90 days Ligand Pharmaceuticals General has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly fragile basic indicators, Ligand Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.
Best Buy 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental drivers, Best Buy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Ligand Pharmaceuticals and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ligand Pharmaceuticals and Best Buy

The main advantage of trading using opposite Ligand Pharmaceuticals and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ligand Pharmaceuticals position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
The idea behind Ligand Pharmaceuticals General and Best Buy Co 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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