Correlation Between Passage Bio and Ligand Pharmaceuticals

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

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

Diversification Opportunities for Passage Bio and Ligand Pharmaceuticals

-0.03

Correlation Coefficient

Passage Bio  Ligand Pharmaceuticals

Good diversification

The 3 months correlation between Passage and Ligand is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Ligand Pharmaceuticals Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligand Pharmaceuticals and Passage Bio 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 Passage Bio are associated (or correlated) with Ligand Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligand Pharmaceuticals has no effect on the direction of Passage Bio i.e., Passage Bio and Ligand Pharmaceuticals go up and down completely randomly.

Pair Corralation between Passage Bio and Ligand Pharmaceuticals

Given the investment horizon of 90 days Passage Bio is expected to generate 4.1 times more return on investment than Ligand Pharmaceuticals. However, Passage Bio is 4.1 times more volatile than Ligand Pharmaceuticals Incorporated. It trades about 0.12 of its potential returns per unit of risk. Ligand Pharmaceuticals Incorporated is currently generating about 0.12 per unit of risk. If you would invest  66.00  in Passage Bio on September 1, 2024 and sell it today you would earn a total of  47.00  from holding Passage Bio or generate 71.21% return on investment over 90 days.

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

Passage Bio  vs.  Ligand Pharmaceuticals Incorpo

Passage Bio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Passage Bio reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Passage Bio and Ligand Pharmaceuticals

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

The idea behind Passage Bio and Ligand Pharmaceuticals Incorporated 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .