Correlation Between Viking Therapeutics and Incyte

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

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

Diversification Opportunities for Viking Therapeutics and Incyte

-0.26

Correlation Coefficient

Viking Therapeutics  Incyte

Very good diversification

The 3 months correlation between Viking and Incyte is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Viking Therapeutics and Incyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incyte and Viking Therapeutics 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 Viking Therapeutics are associated (or correlated) with Incyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incyte has no effect on the direction of Viking Therapeutics i.e., Viking Therapeutics and Incyte go up and down completely randomly.

Pair Corralation between Viking Therapeutics and Incyte

Given the investment horizon of 90 days Viking Therapeutics is expected to under-perform the Incyte. In addition to that, Viking Therapeutics is 1.87 times more volatile than Incyte. It trades about -0.07 of its total potential returns per unit of risk. Incyte is currently generating about 0.1 per unit of volatility. If you would invest  6,336  in Incyte on September 12, 2024 and sell it today you would earn a total of  912.00  from holding Incyte or generate 14.39% return on investment over 90 days.

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

Viking Therapeutics  vs.  Incyte

Viking Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viking Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Incyte

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Incyte are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Incyte showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Viking Therapeutics and Incyte

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

The idea behind Viking Therapeutics and Incyte 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.