Correlation Between Viridian Therapeutics and Viking Therapeutics

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

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

Diversification Opportunities for Viridian Therapeutics and Viking Therapeutics

0.71

Correlation Coefficient

Viridian Therapeutics  Viking Therapeutics

Poor diversification

The 3 months correlation between Viridian and Viking is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Viridian Therapeutics and Viking Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viking Therapeutics and Viridian 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 Viridian Therapeutics are associated (or correlated) with Viking Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viking Therapeutics has no effect on the direction of Viridian Therapeutics i.e., Viridian Therapeutics and Viking Therapeutics go up and down completely randomly.

Pair Corralation between Viridian Therapeutics and Viking Therapeutics

Given the investment horizon of 90 days Viridian Therapeutics is expected to generate 58.65 times less return on investment than Viking Therapeutics. But when comparing it to its historical volatility, Viridian Therapeutics is 2.25 times less risky than Viking Therapeutics. It trades about 0.0 of its potential returns per unit of risk. Viking Therapeutics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,801  in Viking Therapeutics on September 16, 2024 and sell it today you would earn a total of  2,902  from holding Viking Therapeutics or generate 161.13% return on investment over 90 days.

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

Viridian Therapeutics  vs.  Viking Therapeutics

Viridian Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viridian Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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

Pair Trading with Viridian Therapeutics and Viking Therapeutics

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

The idea behind Viridian Therapeutics and Viking 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.