Correlation Between Intercept Pharmaceuticals and TG Therapeutics

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

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

Diversification Opportunities for Intercept Pharmaceuticals and TG Therapeutics

-0.37

Correlation Coefficient

Intercept Pharmaceuticals  TG Therapeutics

Very good diversification

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

Pair Corralation between Intercept Pharmaceuticals and TG Therapeutics

Given the investment horizon of 90 days Intercept Pharmaceuticals is expected to under-perform the TG Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Intercept Pharmaceuticals is 1.06 times less risky than TG Therapeutics. The stock trades about -0.02 of its potential returns per unit of risk. The TG Therapeutics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  906.00  in TG Therapeutics on September 3, 2024 and sell it today you would earn a total of  2,603  from holding TG Therapeutics or generate 287.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.91%
Values	Daily Returns

Intercept Pharmaceuticals  vs.  TG Therapeutics

Intercept Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intercept Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Intercept Pharmaceuticals is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

TG Therapeutics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TG Therapeutics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, TG Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intercept Pharmaceuticals and TG Therapeutics

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

The idea behind Intercept Pharmaceuticals and TG Therapeutics 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 Transaction History module to view history of all your transactions and understand their impact on performance.