Correlation Between Incyte and Halozyme Therapeutics

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

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

Diversification Opportunities for Incyte and Halozyme Therapeutics

0.3

Correlation Coefficient

Incyte  Halozyme Therapeutics

Weak diversification

The 3 months correlation between Incyte and Halozyme is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Incyte and Halozyme Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halozyme Therapeutics and Incyte 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 Incyte are associated (or correlated) with Halozyme Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halozyme Therapeutics has no effect on the direction of Incyte i.e., Incyte and Halozyme Therapeutics go up and down completely randomly.

Pair Corralation between Incyte and Halozyme Therapeutics

Given the investment horizon of 90 days Incyte is expected to generate 0.72 times more return on investment than Halozyme Therapeutics. However, Incyte is 1.39 times less risky than Halozyme Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Halozyme Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  6,574  in Incyte on October 8, 2024 and sell it today you would earn a total of  389.00  from holding Incyte or generate 5.92% return on investment over 90 days.

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

Incyte  vs.  Halozyme Therapeutics

Incyte

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Incyte are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Incyte may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Halozyme Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halozyme Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Incyte and Halozyme Therapeutics

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

The idea behind Incyte and Halozyme 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.