Correlation Between Apellis Pharmaceuticals and Viridian Therapeutics

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

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

Diversification Opportunities for Apellis Pharmaceuticals and Viridian Therapeutics

-0.74

Correlation Coefficient

Apellis Pharmaceuticals  Viridian Therapeutics

Pay attention - limited upside

The 3 months correlation between Apellis and Viridian is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Apellis Pharmaceuticals and Viridian Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viridian Therapeutics and Apellis 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 Apellis Pharmaceuticals are associated (or correlated) with Viridian Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viridian Therapeutics has no effect on the direction of Apellis Pharmaceuticals i.e., Apellis Pharmaceuticals and Viridian Therapeutics go up and down completely randomly.

Pair Corralation between Apellis Pharmaceuticals and Viridian Therapeutics

Given the investment horizon of 90 days Apellis Pharmaceuticals is expected to under-perform the Viridian Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Apellis Pharmaceuticals is 1.53 times less risky than Viridian Therapeutics. The stock trades about -0.01 of its potential returns per unit of risk. The Viridian Therapeutics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,484  in Viridian Therapeutics on September 4, 2024 and sell it today you would earn a total of  616.00  from holding Viridian Therapeutics or generate 41.51% return on investment over 90 days.

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

Apellis Pharmaceuticals  vs.  Viridian Therapeutics

Apellis Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apellis Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Apellis Pharmaceuticals is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Viridian Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Viridian Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Viridian Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apellis Pharmaceuticals and Viridian Therapeutics

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

The idea behind Apellis Pharmaceuticals and Viridian 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.