Correlation Between Legend BiotechCorp and Carvana
Can any of the company-specific risk be diversified away by investing in both Legend BiotechCorp and Carvana 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 Legend BiotechCorp and Carvana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legend BiotechCorp and Carvana Co, you can compare the effects of market volatilities on Legend BiotechCorp and Carvana 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 Legend BiotechCorp with a short position of Carvana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend BiotechCorp and Carvana.
Diversification Opportunities for Legend BiotechCorp and Carvana
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Legend and Carvana is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Legend BiotechCorp and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana and Legend BiotechCorp 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 Legend BiotechCorp are associated (or correlated) with Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of Legend BiotechCorp i.e., Legend BiotechCorp and Carvana go up and down completely randomly.
Pair Corralation between Legend BiotechCorp and Carvana
Given the investment horizon of 90 days Legend BiotechCorp is expected to under-perform the Carvana. But the stock apears to be less risky and, when comparing its historical volatility, Legend BiotechCorp is 1.57 times less risky than Carvana. The stock trades about -0.66 of its potential returns per unit of risk. The Carvana Co is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest 8,642 in Carvana Co on January 20, 2024 and sell it today you would lose (1,527) from holding Carvana Co or give up 17.67% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Legend BiotechCorp vs. Carvana Co
Performance |
Timeline |
Legend BiotechCorp |
Carvana |
Legend BiotechCorp and Carvana Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legend BiotechCorp and Carvana
The main advantage of trading using opposite Legend BiotechCorp and Carvana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legend BiotechCorp position performs unexpectedly, Carvana 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 Carvana will offset losses from the drop in Carvana's long position.Legend BiotechCorp vs. VaxcyteInc | Legend BiotechCorp vs. Apellis Pharmaceuticals | Legend BiotechCorp vs. Travere Therapeutics | Legend BiotechCorp vs. Akero Therapeutics |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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