Correlation Between BioXcel Therapeutics and Alnylam Pharmaceuticals

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

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

Diversification Opportunities for BioXcel Therapeutics and Alnylam Pharmaceuticals

0.27

Correlation Coefficient

BioXcel Therapeutics  Alnylam Pharmaceuticals

Modest diversification

The 3 months correlation between BioXcel and Alnylam is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BioXcel Therapeutics and Alnylam Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alnylam Pharmaceuticals and BioXcel 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 BioXcel Therapeutics are associated (or correlated) with Alnylam Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alnylam Pharmaceuticals has no effect on the direction of BioXcel Therapeutics i.e., BioXcel Therapeutics and Alnylam Pharmaceuticals go up and down completely randomly.

Pair Corralation between BioXcel Therapeutics and Alnylam Pharmaceuticals

Given the investment horizon of 90 days BioXcel Therapeutics is expected to under-perform the Alnylam Pharmaceuticals. In addition to that, BioXcel Therapeutics is 2.89 times more volatile than Alnylam Pharmaceuticals. It trades about -0.07 of its total potential returns per unit of risk. Alnylam Pharmaceuticals is currently generating about 0.01 per unit of volatility. If you would invest  25,378  in Alnylam Pharmaceuticals on September 2, 2024 and sell it today you would lose (71.00) from holding Alnylam Pharmaceuticals or give up 0.28% of portfolio value over 90 days.

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

BioXcel Therapeutics  vs.  Alnylam Pharmaceuticals

BioXcel Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BioXcel Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Alnylam Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alnylam Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Alnylam Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BioXcel Therapeutics and Alnylam Pharmaceuticals

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

The idea behind BioXcel Therapeutics and Alnylam 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.