Correlation Between Lexicon Pharmaceuticals and Effector Therapeutics

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

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

Diversification Opportunities for Lexicon Pharmaceuticals and Effector Therapeutics

0.0

Correlation Coefficient

Lexicon Pharmaceuticals  Effector Therapeutics

Pay attention - limited upside

The 3 months correlation between Lexicon and Effector is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lexicon Pharmaceuticals and Effector Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Effector Therapeutics and Lexicon 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 Lexicon Pharmaceuticals are associated (or correlated) with Effector Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Effector Therapeutics has no effect on the direction of Lexicon Pharmaceuticals i.e., Lexicon Pharmaceuticals and Effector Therapeutics go up and down completely randomly.

Pair Corralation between Lexicon Pharmaceuticals and Effector Therapeutics

If you would invest  72.00  in Lexicon Pharmaceuticals on December 30, 2024 and sell it today you would lose (15.00) from holding Lexicon Pharmaceuticals or give up 20.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lexicon Pharmaceuticals  vs.  Effector Therapeutics

Lexicon Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lexicon Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lexicon Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Effector Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Effector Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Effector Therapeutics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lexicon Pharmaceuticals and Effector Therapeutics

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

The idea behind Lexicon Pharmaceuticals and Effector 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.