Correlation Between VistaGen Therapeutics and Vanda Pharmaceuticals

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

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

Diversification Opportunities for VistaGen Therapeutics and Vanda Pharmaceuticals

-0.1

Correlation Coefficient

VistaGen Therapeutics  Vanda Pharmaceuticals

Good diversification

The 3 months correlation between VistaGen and Vanda is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding VistaGen Therapeutics and Vanda Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanda Pharmaceuticals and VistaGen 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 VistaGen Therapeutics are associated (or correlated) with Vanda Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanda Pharmaceuticals has no effect on the direction of VistaGen Therapeutics i.e., VistaGen Therapeutics and Vanda Pharmaceuticals go up and down completely randomly.

Pair Corralation between VistaGen Therapeutics and Vanda Pharmaceuticals

Given the investment horizon of 90 days VistaGen Therapeutics is expected to under-perform the Vanda Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, VistaGen Therapeutics is 1.06 times less risky than Vanda Pharmaceuticals. The stock trades about -0.14 of its potential returns per unit of risk. The Vanda Pharmaceuticals is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  508.00  in Vanda Pharmaceuticals on September 16, 2024 and sell it today you would lose (47.00) from holding Vanda Pharmaceuticals or give up 9.25% of portfolio value over 90 days.

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

VistaGen Therapeutics  vs.  Vanda Pharmaceuticals

VistaGen Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VistaGen 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 technical and 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.

Vanda Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanda Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with VistaGen Therapeutics and Vanda Pharmaceuticals

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

The idea behind VistaGen Therapeutics and Vanda 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.