Correlation Between Viking Therapeutics and Equillium

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

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

Diversification Opportunities for Viking Therapeutics and Equillium

0.39

Correlation Coefficient

Viking Therapeutics  Equillium

Weak diversification

The 3 months correlation between Viking and Equillium is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Viking Therapeutics and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium 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 Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of Viking Therapeutics i.e., Viking Therapeutics and Equillium go up and down completely randomly.

Pair Corralation between Viking Therapeutics and Equillium

Given the investment horizon of 90 days Viking Therapeutics is expected to generate 0.86 times more return on investment than Equillium. However, Viking Therapeutics is 1.16 times less risky than Equillium. It trades about -0.04 of its potential returns per unit of risk. Equillium is currently generating about -0.07 per unit of risk. If you would invest  9,118  in Viking Therapeutics on February 5, 2024 and sell it today you would lose (1,421) from holding Viking Therapeutics or give up 15.58% of portfolio value over 90 days.

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

Viking Therapeutics  vs.  Equillium

Viking Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Viking Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Viking Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Equillium

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Viking Therapeutics and Equillium

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

The idea behind Viking Therapeutics and Equillium 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.