Correlation Between Exelixis and Sangamo Therapeutics

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

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

Diversification Opportunities for Exelixis and Sangamo Therapeutics

0.84

Correlation Coefficient

Exelixis  Sangamo Therapeutics

Very poor diversification

The 3 months correlation between Exelixis and Sangamo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Exelixis and Sangamo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sangamo Therapeutics and Exelixis 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 Exelixis are associated (or correlated) with Sangamo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sangamo Therapeutics has no effect on the direction of Exelixis i.e., Exelixis and Sangamo Therapeutics go up and down completely randomly.

Pair Corralation between Exelixis and Sangamo Therapeutics

Given the investment horizon of 90 days Exelixis is expected to generate 0.1 times more return on investment than Sangamo Therapeutics. However, Exelixis is 10.09 times less risky than Sangamo Therapeutics. It trades about -0.16 of its potential returns per unit of risk. Sangamo Therapeutics is currently generating about -0.1 per unit of risk. If you would invest  3,577  in Exelixis on October 5, 2024 and sell it today you would lose (183.00) from holding Exelixis or give up 5.12% of portfolio value over 90 days.

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

Exelixis  vs.  Sangamo Therapeutics

Exelixis

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exelixis are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Exelixis disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sangamo Therapeutics

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Exelixis and Sangamo Therapeutics

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

The idea behind Exelixis and Sangamo Therapeutics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.