Correlation Between Verona Pharma and GlycoMimetics

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

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

Diversification Opportunities for Verona Pharma and GlycoMimetics

0.14

Correlation Coefficient

Verona Pharma  GlycoMimetics

Average diversification

The 3 months correlation between Verona and GlycoMimetics is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Verona Pharma PLC and GlycoMimetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlycoMimetics and Verona Pharma 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 Verona Pharma PLC are associated (or correlated) with GlycoMimetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlycoMimetics has no effect on the direction of Verona Pharma i.e., Verona Pharma and GlycoMimetics go up and down completely randomly.

Pair Corralation between Verona Pharma and GlycoMimetics

Given the investment horizon of 90 days Verona Pharma PLC is expected to generate 0.66 times more return on investment than GlycoMimetics. However, Verona Pharma PLC is 1.52 times less risky than GlycoMimetics. It trades about 0.14 of its potential returns per unit of risk. GlycoMimetics is currently generating about -0.01 per unit of risk. If you would invest  4,702  in Verona Pharma PLC on December 30, 2024 and sell it today you would earn a total of  1,568  from holding Verona Pharma PLC or generate 33.35% return on investment over 90 days.

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

Verona Pharma PLC  vs.  GlycoMimetics

Verona Pharma PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verona Pharma PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Verona Pharma sustained solid returns over the last few months and may actually be approaching a breakup point.

GlycoMimetics

Risk-Adjusted Performance

Very Weak

Over the last 90 days GlycoMimetics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, GlycoMimetics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Verona Pharma and GlycoMimetics

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

The idea behind Verona Pharma PLC and GlycoMimetics 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.