Correlation Between Liquidia Technologies and Vanda Pharmaceuticals

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

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

Diversification Opportunities for Liquidia Technologies and Vanda Pharmaceuticals

-0.52

Correlation Coefficient

Liquidia Technologies  Vanda Pharmaceuticals

Excellent diversification

The 3 months correlation between Liquidia and Vanda is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Liquidia Technologies and Vanda Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanda Pharmaceuticals and Liquidia Technologies 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 Liquidia Technologies are associated (or correlated) with Vanda Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanda Pharmaceuticals has no effect on the direction of Liquidia Technologies i.e., Liquidia Technologies and Vanda Pharmaceuticals go up and down completely randomly.

Pair Corralation between Liquidia Technologies and Vanda Pharmaceuticals

Given the investment horizon of 90 days Liquidia Technologies is expected to generate 1.07 times more return on investment than Vanda Pharmaceuticals. However, Liquidia Technologies is 1.07 times more volatile than Vanda Pharmaceuticals. It trades about 0.21 of its potential returns per unit of risk. Vanda Pharmaceuticals is currently generating about -0.05 per unit of risk. If you would invest  1,155  in Liquidia Technologies on November 29, 2024 and sell it today you would earn a total of  393.00  from holding Liquidia Technologies or generate 34.03% return on investment over 90 days.

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

Liquidia Technologies  vs.  Vanda Pharmaceuticals

Liquidia Technologies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Liquidia Technologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Liquidia Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Vanda Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanda Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Liquidia Technologies and Vanda Pharmaceuticals

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

The idea behind Liquidia Technologies and Vanda Pharmaceuticals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.