Correlation Between Viking Therapeutics and Terns Pharmaceuticals

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

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

Diversification Opportunities for Viking Therapeutics and Terns Pharmaceuticals

0.24

Correlation Coefficient

Viking Therapeutics  Terns Pharmaceuticals

Modest diversification

The 3 months correlation between Viking and Terns is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Viking Therapeutics and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals 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 Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Viking Therapeutics i.e., Viking Therapeutics and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between Viking Therapeutics and Terns Pharmaceuticals

Given the investment horizon of 90 days Viking Therapeutics is expected to generate 1.53 times more return on investment than Terns Pharmaceuticals. However, Viking Therapeutics is 1.53 times more volatile than Terns Pharmaceuticals. It trades about 0.06 of its potential returns per unit of risk. Terns Pharmaceuticals is currently generating about -0.01 per unit of risk. If you would invest  2,479  in Viking Therapeutics on August 31, 2024 and sell it today you would earn a total of  2,815  from holding Viking Therapeutics or generate 113.55% return on investment over 90 days.

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

Viking Therapeutics  vs.  Terns Pharmaceuticals

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.

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Terns Pharmaceuticals is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Viking Therapeutics and Terns Pharmaceuticals

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

The idea behind Viking Therapeutics and Terns 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.