Correlation Between Ligand Pharmaceuticals and Connect Biopharma

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

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

Diversification Opportunities for Ligand Pharmaceuticals and Connect Biopharma

-0.71

Correlation Coefficient

Ligand Pharmaceuticals  Connect Biopharma

Pay attention - limited upside

The 3 months correlation between Ligand and Connect is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ligand Pharmaceuticals Incorpo and Connect Biopharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connect Biopharma and Ligand 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 Ligand Pharmaceuticals Incorporated are associated (or correlated) with Connect Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connect Biopharma has no effect on the direction of Ligand Pharmaceuticals i.e., Ligand Pharmaceuticals and Connect Biopharma go up and down completely randomly.

Pair Corralation between Ligand Pharmaceuticals and Connect Biopharma

Given the investment horizon of 90 days Ligand Pharmaceuticals Incorporated is expected to generate 0.54 times more return on investment than Connect Biopharma. However, Ligand Pharmaceuticals Incorporated is 1.86 times less risky than Connect Biopharma. It trades about 0.12 of its potential returns per unit of risk. Connect Biopharma Holdings is currently generating about -0.03 per unit of risk. If you would invest  10,095  in Ligand Pharmaceuticals Incorporated on September 3, 2024 and sell it today you would earn a total of  2,052  from holding Ligand Pharmaceuticals Incorporated or generate 20.33% return on investment over 90 days.

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

Ligand Pharmaceuticals Incorpo  vs.  Connect Biopharma Holdings

Ligand Pharmaceuticals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ligand Pharmaceuticals Incorporated are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Ligand Pharmaceuticals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Connect Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ligand Pharmaceuticals and Connect Biopharma

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

The idea behind Ligand Pharmaceuticals Incorporated and Connect Biopharma Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.