Correlation Between Ligand Pharmaceuticals and Amicus Therapeutics

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

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

Diversification Opportunities for Ligand Pharmaceuticals and Amicus Therapeutics

0.5

Correlation Coefficient

Ligand Pharmaceuticals  Amicus Therapeutics

Very weak diversification

The 3 months correlation between Ligand and Amicus is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ligand Pharmaceuticals Incorpo and Amicus Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amicus Therapeutics and Ligand 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 Ligand Pharmaceuticals Incorporated are associated (or correlated) with Amicus Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amicus Therapeutics has no effect on the direction of Ligand Pharmaceuticals i.e., Ligand Pharmaceuticals and Amicus Therapeutics go up and down completely randomly.

Pair Corralation between Ligand Pharmaceuticals and Amicus Therapeutics

Given the investment horizon of 90 days Ligand Pharmaceuticals Incorporated is expected to generate 1.41 times more return on investment than Amicus Therapeutics. However, Ligand Pharmaceuticals is 1.41 times more volatile than Amicus Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Amicus Therapeutics is currently generating about -0.1 per unit of risk. If you would invest  10,576  in Ligand Pharmaceuticals Incorporated on December 28, 2024 and sell it today you would earn a total of  186.00  from holding Ligand Pharmaceuticals Incorporated or generate 1.76% return on investment over 90 days.

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

Ligand Pharmaceuticals Incorpo  vs.  Amicus Therapeutics

Ligand Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ligand Pharmaceuticals Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ligand Pharmaceuticals is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Amicus Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amicus Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ligand Pharmaceuticals and Amicus Therapeutics

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

The idea behind Ligand Pharmaceuticals Incorporated and Amicus 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.