Correlation Between Legend Biotech and Adaptive Biotechnologies

Can any of the company-specific risk be diversified away by investing in both Legend Biotech and Adaptive Biotechnologies 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 Adaptive Biotechnologies 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 Adaptive Biotechnologies Corp, you can compare the effects of market volatilities on Legend Biotech and Adaptive Biotechnologies 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 Adaptive Biotechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend Biotech and Adaptive Biotechnologies.

Diversification Opportunities for Legend Biotech and Adaptive Biotechnologies

-0.56

Correlation Coefficient

Legend Biotech  Adaptive Biotechnologies

Excellent diversification

The 3 months correlation between Legend and Adaptive is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Legend Biotech Corp and Adaptive Biotechnologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaptive Biotechnologies 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 Adaptive Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaptive Biotechnologies has no effect on the direction of Legend Biotech i.e., Legend Biotech and Adaptive Biotechnologies go up and down completely randomly.

Pair Corralation between Legend Biotech and Adaptive Biotechnologies

Given the investment horizon of 90 days Legend Biotech Corp is expected to under-perform the Adaptive Biotechnologies. But the stock apears to be less risky and, when comparing its historical volatility, Legend Biotech Corp is 1.71 times less risky than Adaptive Biotechnologies. The stock trades about -0.17 of its potential returns per unit of risk. The Adaptive Biotechnologies Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  490.00  in Adaptive Biotechnologies Corp on September 26, 2024 and sell it today you would earn a total of  149.00  from holding Adaptive Biotechnologies Corp or generate 30.41% return on investment over 90 days.

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

Legend Biotech Corp  vs.  Adaptive Biotechnologies Corp

Legend Biotech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legend Biotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Adaptive Biotechnologies

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adaptive Biotechnologies Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adaptive Biotechnologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Legend Biotech and Adaptive Biotechnologies

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

The idea behind Legend Biotech Corp and Adaptive Biotechnologies Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.