Correlation Between Viking Therapeutics and Verastem

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

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

Diversification Opportunities for Viking Therapeutics and Verastem

-0.53

Correlation Coefficient

Viking Therapeutics  Verastem

Excellent diversification

The 3 months correlation between Viking and Verastem is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Viking Therapeutics and Verastem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verastem 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 Verastem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verastem has no effect on the direction of Viking Therapeutics i.e., Viking Therapeutics and Verastem go up and down completely randomly.

Pair Corralation between Viking Therapeutics and Verastem

Given the investment horizon of 90 days Viking Therapeutics is expected to under-perform the Verastem. But the stock apears to be less risky and, when comparing its historical volatility, Viking Therapeutics is 1.55 times less risky than Verastem. The stock trades about -0.12 of its potential returns per unit of risk. The Verastem is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  367.00  in Verastem on December 29, 2024 and sell it today you would earn a total of  306.00  from holding Verastem or generate 83.38% 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.  Verastem

Viking Therapeutics

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Verastem

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Verastem displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Viking Therapeutics and Verastem

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

The idea behind Viking Therapeutics and Verastem 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.