Correlation Between ACADIA Pharmaceuticals and Viking Therapeutics

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

By analyzing existing cross correlation between ACADIA Pharmaceuticals and Viking Therapeutics, you can compare the effects of market volatilities on ACADIA Pharmaceuticals and Viking Therapeutics 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 ACADIA Pharmaceuticals with a short position of Viking Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACADIA Pharmaceuticals and Viking Therapeutics.

Diversification Opportunities for ACADIA Pharmaceuticals and Viking Therapeutics

-0.47

Correlation Coefficient

ACADIA Pharmaceuticals  Viking Therapeutics

Very good diversification

The 3 months correlation between ACADIA and Viking is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ACADIA Pharmaceuticals and Viking Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viking Therapeutics and ACADIA 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 ACADIA Pharmaceuticals are associated (or correlated) with Viking Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viking Therapeutics has no effect on the direction of ACADIA Pharmaceuticals i.e., ACADIA Pharmaceuticals and Viking Therapeutics go up and down completely randomly.

Pair Corralation between ACADIA Pharmaceuticals and Viking Therapeutics

Given the investment horizon of 90 days ACADIA Pharmaceuticals is expected to generate 0.44 times more return on investment than Viking Therapeutics. However, ACADIA Pharmaceuticals is 2.25 times less risky than Viking Therapeutics. It trades about 0.01 of its potential returns per unit of risk. Viking Therapeutics is currently generating about -0.01 per unit of risk. If you would invest  1,669  in ACADIA Pharmaceuticals on September 4, 2024 and sell it today you would lose (8.00) from holding ACADIA Pharmaceuticals or give up 0.48% of portfolio value over 90 days.

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

ACADIA Pharmaceuticals  vs.  Viking Therapeutics

ACADIA Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACADIA Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ACADIA Pharmaceuticals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Viking Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viking Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Viking Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ACADIA Pharmaceuticals and Viking Therapeutics

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

The idea behind ACADIA Pharmaceuticals and Viking Therapeutics 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.