Correlation Between Eyenovia and Legend Biotech

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

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

Diversification Opportunities for Eyenovia and Legend Biotech

0.7

Correlation Coefficient

Eyenovia  Legend Biotech

Poor diversification

The 3 months correlation between Eyenovia and Legend is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Eyenovia and Legend Biotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend Biotech Corp and Eyenovia 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 Eyenovia are associated (or correlated) with Legend Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend Biotech Corp has no effect on the direction of Eyenovia i.e., Eyenovia and Legend Biotech go up and down completely randomly.

Pair Corralation between Eyenovia and Legend Biotech

Given the investment horizon of 90 days Eyenovia is expected to generate 3.25 times more return on investment than Legend Biotech. However, Eyenovia is 3.25 times more volatile than Legend Biotech Corp. It trades about 0.15 of its potential returns per unit of risk. Legend Biotech Corp is currently generating about -0.19 per unit of risk. If you would invest  8.77  in Eyenovia on October 7, 2024 and sell it today you would earn a total of  2.23  from holding Eyenovia or generate 25.43% return on investment over 90 days.

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

Eyenovia  vs.  Legend Biotech Corp

Eyenovia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eyenovia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Legend Biotech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legend Biotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Eyenovia and Legend Biotech

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

The idea behind Eyenovia and Legend Biotech Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..