Correlation Between SYSTEMAIR and Vertex Pharmaceuticals

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

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

Diversification Opportunities for SYSTEMAIR and Vertex Pharmaceuticals

-0.35

Correlation Coefficient

SYSTEMAIR  Vertex Pharmaceuticals

Very good diversification

The 3 months correlation between SYSTEMAIR and Vertex is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding SYSTEMAIR AB and Vertex Pharmaceuticals Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals and SYSTEMAIR 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 SYSTEMAIR AB 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 SYSTEMAIR i.e., SYSTEMAIR and Vertex Pharmaceuticals go up and down completely randomly.

Pair Corralation between SYSTEMAIR and Vertex Pharmaceuticals

Assuming the 90 days trading horizon SYSTEMAIR AB is expected to under-perform the Vertex Pharmaceuticals. In addition to that, SYSTEMAIR is 1.29 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

SYSTEMAIR AB  vs.  Vertex Pharmaceuticals Incorpo

SYSTEMAIR AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days SYSTEMAIR AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains 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 SYSTEMAIR and Vertex Pharmaceuticals

The main advantage of trading using opposite SYSTEMAIR and Vertex Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SYSTEMAIR 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 SYSTEMAIR AB 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .