Correlation Between Mustang Bio and Legend BiotechCorp
Can any of the company-specific risk be diversified away by investing in both Mustang Bio and Legend BiotechCorp 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 Mustang Bio and Legend BiotechCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mustang Bio and Legend BiotechCorp, you can compare the effects of market volatilities on Mustang Bio and Legend BiotechCorp 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 Mustang Bio with a short position of Legend BiotechCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mustang Bio and Legend BiotechCorp.
Diversification Opportunities for Mustang Bio and Legend BiotechCorp
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mustang and Legend is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mustang Bio and Legend BiotechCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend BiotechCorp and Mustang Bio 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 Mustang Bio are associated (or correlated) with Legend BiotechCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend BiotechCorp has no effect on the direction of Mustang Bio i.e., Mustang Bio and Legend BiotechCorp go up and down completely randomly.
Pair Corralation between Mustang Bio and Legend BiotechCorp
Given the investment horizon of 90 days Mustang Bio is expected to under-perform the Legend BiotechCorp. In addition to that, Mustang Bio is 2.7 times more volatile than Legend BiotechCorp. It trades about -0.29 of its total potential returns per unit of risk. Legend BiotechCorp is currently generating about -0.12 per unit of volatility. If you would invest 5,813 in Legend BiotechCorp on January 25, 2024 and sell it today you would lose (1,068) from holding Legend BiotechCorp or give up 18.37% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Mustang Bio vs. Legend BiotechCorp
Performance |
Timeline |
Mustang Bio |
Legend BiotechCorp |
Mustang Bio and Legend BiotechCorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mustang Bio and Legend BiotechCorp
The main advantage of trading using opposite Mustang Bio and Legend BiotechCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustang Bio position performs unexpectedly, Legend BiotechCorp 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 Legend BiotechCorp will offset losses from the drop in Legend BiotechCorp's long position.Mustang Bio vs. Checkpoint Therapeutics | Mustang Bio vs. Reviva Pharmaceuticals Holdings | Mustang Bio vs. Fortress Biotech Pref | Mustang Bio vs. Kodiak Sciences |
Legend BiotechCorp vs. VaxcyteInc | Legend BiotechCorp vs. Apellis Pharmaceuticals | Legend BiotechCorp vs. Travere Therapeutics | Legend BiotechCorp vs. Akero Therapeutics |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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