Correlation Between Legend Biotech and Shockwave Medical
Can any of the company-specific risk be diversified away by investing in both Legend Biotech and Shockwave Medical 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 Biotech and Shockwave Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legend Biotech Corp and Shockwave Medical, you can compare the effects of market volatilities on Legend Biotech and Shockwave Medical 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 Biotech with a short position of Shockwave Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend Biotech and Shockwave Medical.
Diversification Opportunities for Legend Biotech and Shockwave Medical
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legend and Shockwave is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Legend Biotech Corp and Shockwave Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shockwave Medical and Legend Biotech 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 Biotech Corp are associated (or correlated) with Shockwave Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shockwave Medical has no effect on the direction of Legend Biotech i.e., Legend Biotech and Shockwave Medical go up and down completely randomly.
Pair Corralation between Legend Biotech and Shockwave Medical
Given the investment horizon of 90 days Legend Biotech is expected to generate 177.4 times less return on investment than Shockwave Medical. But when comparing it to its historical volatility, Legend Biotech Corp is 61.43 times less risky than Shockwave Medical. It trades about 0.08 of its potential returns per unit of risk. Shockwave Medical is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 33,038 in Shockwave Medical on March 13, 2024 and sell it today you would earn a total of 557,253 from holding Shockwave Medical or generate 1686.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 85.71% |
Values | Daily Returns |
Legend Biotech Corp vs. Shockwave Medical
Performance |
Timeline |
Legend Biotech Corp |
Shockwave Medical |
Legend Biotech and Shockwave Medical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legend Biotech and Shockwave Medical
The main advantage of trading using opposite Legend Biotech and Shockwave Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legend Biotech position performs unexpectedly, Shockwave Medical 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 Shockwave Medical will offset losses from the drop in Shockwave Medical's long position.Legend Biotech vs. Vaxcyte | Legend Biotech vs. Apellis Pharmaceuticals | Legend Biotech vs. Travere Therapeutics | Legend Biotech 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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