Correlation Between Moderna and Vertex Pharmaceuticals

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

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

Diversification Opportunities for Moderna and Vertex Pharmaceuticals

-0.64

Correlation Coefficient

Moderna  Vertex Pharmaceuticals

Excellent diversification

The 3 months correlation between Moderna and Vertex is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Moderna and Vertex Pharmaceuticals Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals and Moderna 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 Moderna are associated (or correlated) with Vertex Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceuticals has no effect on the direction of Moderna i.e., Moderna and Vertex Pharmaceuticals go up and down completely randomly.

Pair Corralation between Moderna and Vertex Pharmaceuticals

Assuming the 90 days horizon Moderna is expected to under-perform the Vertex Pharmaceuticals. In addition to that, Moderna is 3.49 times more volatile than Vertex Pharmaceuticals Incorporated. It trades about -0.06 of its total potential returns per unit of risk. Vertex Pharmaceuticals Incorporated is currently generating about 0.17 per unit of volatility. If you would invest  38,995  in Vertex Pharmaceuticals Incorporated on December 30, 2024 and sell it today you would earn a total of  6,990  from holding Vertex Pharmaceuticals Incorporated or generate 17.93% return on investment over 90 days.

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

Moderna  vs.  Vertex Pharmaceuticals Incorpo

Moderna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Vertex Pharmaceuticals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Pharmaceuticals Incorporated are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vertex Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moderna and Vertex Pharmaceuticals

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

The idea behind Moderna and Vertex Pharmaceuticals Incorporated 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.