Correlation Between Galapagos and Achieve Life

Can any of the company-specific risk be diversified away by investing in both Galapagos and Achieve Life 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 Galapagos and Achieve Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Galapagos NV ADR and Achieve Life Sciences, you can compare the effects of market volatilities on Galapagos and Achieve Life 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 Galapagos with a short position of Achieve Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galapagos and Achieve Life.

Diversification Opportunities for Galapagos and Achieve Life

-0.35

Correlation Coefficient

Galapagos  Achieve Life

Very good diversification

The 3 months correlation between Galapagos and Achieve is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Galapagos NV ADR and Achieve Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Achieve Life Sciences and Galapagos 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 Galapagos NV ADR are associated (or correlated) with Achieve Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Achieve Life Sciences has no effect on the direction of Galapagos i.e., Galapagos and Achieve Life go up and down completely randomly.

Pair Corralation between Galapagos and Achieve Life

Given the investment horizon of 90 days Galapagos NV ADR is expected to under-perform the Achieve Life. But the stock apears to be less risky and, when comparing its historical volatility, Galapagos NV ADR is 1.91 times less risky than Achieve Life. The stock trades about -0.28 of its potential returns per unit of risk. The Achieve Life Sciences is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  467.00  in Achieve Life Sciences on February 23, 2024 and sell it today you would earn a total of  48.00  from holding Achieve Life Sciences or generate 10.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Galapagos NV ADR  vs.  Achieve Life Sciences

Galapagos NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galapagos NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Achieve Life Sciences

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Achieve Life Sciences are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical indicators, Achieve Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galapagos and Achieve Life

The main advantage of trading using opposite Galapagos and Achieve Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galapagos position performs unexpectedly, Achieve Life 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 Achieve Life will offset losses from the drop in Achieve Life's long position.

The idea behind Galapagos NV ADR and Achieve Life Sciences 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..