Correlation Between Vaxcyte and LMF Acquisition

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

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

Diversification Opportunities for Vaxcyte and LMF Acquisition

0.82

Correlation Coefficient

Vaxcyte  LMF Acquisition

Very poor diversification

The 3 months correlation between Vaxcyte and LMF is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vaxcyte and LMF Acquisition Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LMF Acquisition Oppo and Vaxcyte 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 Vaxcyte are associated (or correlated) with LMF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LMF Acquisition Oppo has no effect on the direction of Vaxcyte i.e., Vaxcyte and LMF Acquisition go up and down completely randomly.

Pair Corralation between Vaxcyte and LMF Acquisition

Given the investment horizon of 90 days Vaxcyte is expected to generate 0.15 times more return on investment than LMF Acquisition. However, Vaxcyte is 6.76 times less risky than LMF Acquisition. It trades about -0.23 of its potential returns per unit of risk. LMF Acquisition Opportunities is currently generating about -0.06 per unit of risk. If you would invest  9,304  in Vaxcyte on October 5, 2024 and sell it today you would lose (974.00) from holding Vaxcyte or give up 10.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Vaxcyte  vs.  LMF Acquisition Opportunities

Vaxcyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaxcyte 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

LMF Acquisition Oppo

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LMF Acquisition Opportunities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, LMF Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vaxcyte and LMF Acquisition

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

The idea behind Vaxcyte and LMF Acquisition Opportunities 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.