Correlation Between Revolution Medicines and Ligand Pharmaceuticals

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

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

Diversification Opportunities for Revolution Medicines and Ligand Pharmaceuticals

0.23

Correlation Coefficient

Revolution Medicines  Ligand Pharmaceuticals

Modest diversification

The 3 months correlation between Revolution and Ligand is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and Ligand Pharmaceuticals Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligand Pharmaceuticals and Revolution Medicines 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 Revolution Medicines are associated (or correlated) with Ligand Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligand Pharmaceuticals has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and Ligand Pharmaceuticals go up and down completely randomly.

Pair Corralation between Revolution Medicines and Ligand Pharmaceuticals

Given the investment horizon of 90 days Revolution Medicines is expected to under-perform the Ligand Pharmaceuticals. In addition to that, Revolution Medicines is 1.02 times more volatile than Ligand Pharmaceuticals Incorporated. It trades about -0.08 of its total potential returns per unit of risk. Ligand Pharmaceuticals Incorporated is currently generating about 0.02 per unit of volatility. If you would invest  10,576  in Ligand Pharmaceuticals Incorporated on December 30, 2024 and sell it today you would earn a total of  186.00  from holding Ligand Pharmaceuticals Incorporated or generate 1.76% return on investment over 90 days.

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

Revolution Medicines  vs.  Ligand Pharmaceuticals Incorpo

Revolution Medicines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Revolution Medicines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ligand Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ligand Pharmaceuticals Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ligand Pharmaceuticals is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Revolution Medicines and Ligand Pharmaceuticals

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

The idea behind Revolution Medicines and Ligand Pharmaceuticals Incorporated 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 Stocks Directory module to find actively traded stocks across global markets.