Correlation Between Lexicon Pharmaceuticals and Elevation Oncology

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

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

Diversification Opportunities for Lexicon Pharmaceuticals and Elevation Oncology

0.76

Correlation Coefficient

Lexicon Pharmaceuticals  Elevation Oncology

Poor diversification

The 3 months correlation between Lexicon and Elevation is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lexicon Pharmaceuticals and Elevation Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elevation Oncology 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 Elevation Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elevation Oncology has no effect on the direction of Lexicon Pharmaceuticals i.e., Lexicon Pharmaceuticals and Elevation Oncology go up and down completely randomly.

Pair Corralation between Lexicon Pharmaceuticals and Elevation Oncology

Given the investment horizon of 90 days Lexicon Pharmaceuticals is expected to generate 1.52 times more return on investment than Elevation Oncology. However, Lexicon Pharmaceuticals is 1.52 times more volatile than Elevation Oncology. It trades about 0.04 of its potential returns per unit of risk. Elevation Oncology is currently generating about -0.11 per unit of risk. 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	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Lexicon Pharmaceuticals  vs.  Elevation Oncology

Lexicon Pharmaceuticals

Risk-Adjusted Performance

Insignificant

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.

Elevation Oncology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elevation Oncology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lexicon Pharmaceuticals and Elevation Oncology

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

The idea behind Lexicon Pharmaceuticals and Elevation Oncology 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.