Correlation Between Waters and Legend Biotech

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

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

Diversification Opportunities for Waters and Legend Biotech

0.07

Correlation Coefficient

Waters  Legend Biotech

Significant diversification

The 3 months correlation between Waters and Legend is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Legend Biotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend Biotech Corp and Waters 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 Waters are associated (or correlated) with Legend Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend Biotech Corp has no effect on the direction of Waters i.e., Waters and Legend Biotech go up and down completely randomly.

Pair Corralation between Waters and Legend Biotech

Considering the 90-day investment horizon Waters is expected to under-perform the Legend Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Waters is 1.72 times less risky than Legend Biotech. The stock trades about -0.01 of its potential returns per unit of risk. The Legend Biotech Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,277  in Legend Biotech Corp on December 28, 2024 and sell it today you would earn a total of  229.00  from holding Legend Biotech Corp or generate 6.99% return on investment over 90 days.

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

Waters  vs.  Legend Biotech Corp

Waters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Legend Biotech Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legend Biotech Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Legend Biotech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Waters and Legend Biotech

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

The idea behind Waters and Legend Biotech Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.