Correlation Between Dynavax Technologies and Jazz Pharmaceuticals

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

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

Diversification Opportunities for Dynavax Technologies and Jazz Pharmaceuticals

0.85

Correlation Coefficient

Dynavax Technologies  Jazz Pharmaceuticals

Very poor diversification

The 3 months correlation between Dynavax and Jazz is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dynavax Technologies and Jazz Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals PLC and Dynavax Technologies 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 Dynavax Technologies are associated (or correlated) with Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals PLC has no effect on the direction of Dynavax Technologies i.e., Dynavax Technologies and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between Dynavax Technologies and Jazz Pharmaceuticals

Given the investment horizon of 90 days Dynavax Technologies is expected to generate 1.08 times less return on investment than Jazz Pharmaceuticals. But when comparing it to its historical volatility, Dynavax Technologies is 1.55 times less risky than Jazz Pharmaceuticals. It trades about 0.1 of its potential returns per unit of risk. Jazz Pharmaceuticals PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,682  in Jazz Pharmaceuticals PLC on October 20, 2024 and sell it today you would earn a total of  436.00  from holding Jazz Pharmaceuticals PLC or generate 3.73% return on investment over 90 days.

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

Dynavax Technologies  vs.  Jazz Pharmaceuticals PLC

Dynavax Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynavax Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dynavax Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Jazz Pharmaceuticals PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Jazz Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dynavax Technologies and Jazz Pharmaceuticals

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

The idea behind Dynavax Technologies and Jazz Pharmaceuticals PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.