Correlation Between Molecular Partners and Longboard Pharmaceuticals

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

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

Diversification Opportunities for Molecular Partners and Longboard Pharmaceuticals

0.45

Correlation Coefficient

Molecular Partners  Longboard Pharmaceuticals

Very weak diversification

The 3 months correlation between Molecular and Longboard is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Molecular Partners AG and Longboard Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longboard Pharmaceuticals and Molecular Partners 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 Molecular Partners AG are associated (or correlated) with Longboard Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longboard Pharmaceuticals has no effect on the direction of Molecular Partners i.e., Molecular Partners and Longboard Pharmaceuticals go up and down completely randomly.

Pair Corralation between Molecular Partners and Longboard Pharmaceuticals

Given the investment horizon of 90 days Molecular Partners AG is expected to under-perform the Longboard Pharmaceuticals. In addition to that, Molecular Partners is 1.01 times more volatile than Longboard Pharmaceuticals. It trades about -0.01 of its total potential returns per unit of risk. Longboard Pharmaceuticals is currently generating about 0.17 per unit of volatility. If you would invest  2,082  in Longboard Pharmaceuticals on September 22, 2024 and sell it today you would earn a total of  3,916  from holding Longboard Pharmaceuticals or generate 188.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.55%
Values	Daily Returns

Molecular Partners AG  vs.  Longboard Pharmaceuticals

Molecular Partners

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Molecular Partners AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Molecular Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Longboard Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Longboard Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unfluctuating basic indicators, Longboard Pharmaceuticals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Molecular Partners and Longboard Pharmaceuticals

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

The idea behind Molecular Partners AG and Longboard 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.