Correlation Between Arrowhead Pharmaceuticals and Lixte Biotechnology

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

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

Diversification Opportunities for Arrowhead Pharmaceuticals and Lixte Biotechnology

0.37

Correlation Coefficient

Arrowhead Pharmaceuticals  Lixte Biotechnology

Weak diversification

The 3 months correlation between Arrowhead and Lixte is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Arrowhead Pharmaceuticals and Lixte Biotechnology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixte Biotechnology and Arrowhead 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 Arrowhead Pharmaceuticals are associated (or correlated) with Lixte Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixte Biotechnology has no effect on the direction of Arrowhead Pharmaceuticals i.e., Arrowhead Pharmaceuticals and Lixte Biotechnology go up and down completely randomly.

Pair Corralation between Arrowhead Pharmaceuticals and Lixte Biotechnology

Given the investment horizon of 90 days Arrowhead Pharmaceuticals is expected to generate 3.92 times less return on investment than Lixte Biotechnology. But when comparing it to its historical volatility, Arrowhead Pharmaceuticals is 2.06 times less risky than Lixte Biotechnology. It trades about 0.04 of its potential returns per unit of risk. Lixte Biotechnology Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Lixte Biotechnology Holdings on October 4, 2024 and sell it today you would earn a total of  37.00  from holding Lixte Biotechnology Holdings or generate 20.0% return on investment over 90 days.

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

Arrowhead Pharmaceuticals  vs.  Lixte Biotechnology Holdings

Arrowhead Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrowhead Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Arrowhead Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lixte Biotechnology

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lixte Biotechnology Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Lixte Biotechnology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrowhead Pharmaceuticals and Lixte Biotechnology

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

The idea behind Arrowhead Pharmaceuticals and Lixte Biotechnology 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.