Correlation Between Lyell Immunopharma and Virax Biolabs

Can any of the company-specific risk be diversified away by investing in both Lyell Immunopharma and Virax Biolabs 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 Lyell Immunopharma and Virax Biolabs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyell Immunopharma and Virax Biolabs Group, you can compare the effects of market volatilities on Lyell Immunopharma and Virax Biolabs 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 Lyell Immunopharma with a short position of Virax Biolabs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyell Immunopharma and Virax Biolabs.

Diversification Opportunities for Lyell Immunopharma and Virax Biolabs

0.27

Correlation Coefficient

Lyell Immunopharma  Virax Biolabs

Modest diversification

The 3 months correlation between Lyell and Virax is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lyell Immunopharma and Virax Biolabs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virax Biolabs Group and Lyell Immunopharma 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 Lyell Immunopharma are associated (or correlated) with Virax Biolabs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virax Biolabs Group has no effect on the direction of Lyell Immunopharma i.e., Lyell Immunopharma and Virax Biolabs go up and down completely randomly.

Pair Corralation between Lyell Immunopharma and Virax Biolabs

Given the investment horizon of 90 days Lyell Immunopharma is expected to under-perform the Virax Biolabs. But the stock apears to be less risky and, when comparing its historical volatility, Lyell Immunopharma is 2.21 times less risky than Virax Biolabs. The stock trades about -0.03 of its potential returns per unit of risk. The Virax Biolabs Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Virax Biolabs Group on September 14, 2024 and sell it today you would lose (95.00) from holding Virax Biolabs Group or give up 38.0% of portfolio value over 90 days.

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

Lyell Immunopharma  vs.  Virax Biolabs Group

Lyell Immunopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyell Immunopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Virax Biolabs Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virax Biolabs Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lyell Immunopharma and Virax Biolabs

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

The idea behind Lyell Immunopharma and Virax Biolabs Group 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.