Correlation Between Viking Therapeutics and Axsome Therapeutics

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

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

Diversification Opportunities for Viking Therapeutics and Axsome Therapeutics

-0.54

Correlation Coefficient

Viking Therapeutics  Axsome Therapeutics

Excellent diversification

The 3 months correlation between Viking and Axsome is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Viking Therapeutics and Axsome Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axsome Therapeutics and Viking Therapeutics 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 Viking Therapeutics are associated (or correlated) with Axsome Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axsome Therapeutics has no effect on the direction of Viking Therapeutics i.e., Viking Therapeutics and Axsome Therapeutics go up and down completely randomly.

Pair Corralation between Viking Therapeutics and Axsome Therapeutics

Given the investment horizon of 90 days Viking Therapeutics is expected to generate 3.19 times more return on investment than Axsome Therapeutics. However, Viking Therapeutics is 3.19 times more volatile than Axsome Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Axsome Therapeutics is currently generating about 0.03 per unit of risk. If you would invest  364.00  in Viking Therapeutics on September 3, 2024 and sell it today you would earn a total of  4,930  from holding Viking Therapeutics or generate 1354.4% return on investment over 90 days.

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

Viking Therapeutics  vs.  Axsome Therapeutics

Viking Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viking Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Viking Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Axsome Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Axsome Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Axsome Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Viking Therapeutics and Axsome Therapeutics

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

The idea behind Viking Therapeutics and Axsome Therapeutics 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.