Correlation Between UCB SA and Galapagos

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

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

Diversification Opportunities for UCB SA and Galapagos

0.19

Correlation Coefficient

UCB SA  Galapagos

Average diversification

The 3 months correlation between UCB and Galapagos is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding UCB SA and Galapagos NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galapagos NV and UCB SA 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 UCB SA are associated (or correlated) with Galapagos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galapagos NV has no effect on the direction of UCB SA i.e., UCB SA and Galapagos go up and down completely randomly.

Pair Corralation between UCB SA and Galapagos

Assuming the 90 days trading horizon UCB SA is expected to under-perform the Galapagos. In addition to that, UCB SA is 1.2 times more volatile than Galapagos NV. It trades about -0.08 of its total potential returns per unit of risk. Galapagos NV is currently generating about -0.08 per unit of volatility. If you would invest  2,630  in Galapagos NV on December 30, 2024 and sell it today you would lose (280.00) from holding Galapagos NV or give up 10.65% of portfolio value over 90 days.

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

UCB SA  vs.  Galapagos NV

UCB SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days UCB SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Galapagos NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Galapagos NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with UCB SA and Galapagos

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

The idea behind UCB SA and Galapagos NV 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.