Correlation Between Ligand Pharmaceuticals and Lyell Immunopharma

Can any of the company-specific risk be diversified away by investing in both Ligand Pharmaceuticals and Lyell Immunopharma 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 Lyell Immunopharma 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 Lyell Immunopharma, you can compare the effects of market volatilities on Ligand Pharmaceuticals and Lyell Immunopharma 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 Lyell Immunopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligand Pharmaceuticals and Lyell Immunopharma.

Diversification Opportunities for Ligand Pharmaceuticals and Lyell Immunopharma

0.24

Correlation Coefficient

Ligand Pharmaceuticals  Lyell Immunopharma

Modest diversification

The 3 months correlation between Ligand and Lyell is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ligand Pharmaceuticals Incorpo and Lyell Immunopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyell Immunopharma 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 Lyell Immunopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyell Immunopharma has no effect on the direction of Ligand Pharmaceuticals i.e., Ligand Pharmaceuticals and Lyell Immunopharma go up and down completely randomly.

Pair Corralation between Ligand Pharmaceuticals and Lyell Immunopharma

Given the investment horizon of 90 days Ligand Pharmaceuticals is expected to generate 1.02 times less return on investment than Lyell Immunopharma. But when comparing it to its historical volatility, Ligand Pharmaceuticals Incorporated is 2.27 times less risky than Lyell Immunopharma. It trades about 0.03 of its potential returns per unit of risk. Lyell Immunopharma is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Lyell Immunopharma on December 28, 2024 and sell it today you would lose (3.00) from holding Lyell Immunopharma or give up 4.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Ligand Pharmaceuticals Incorpo  vs.  Lyell Immunopharma

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 2 (%) 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.

Lyell Immunopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyell Immunopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Lyell Immunopharma is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ligand Pharmaceuticals and Lyell Immunopharma

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

The idea behind Ligand Pharmaceuticals Incorporated and Lyell Immunopharma 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.