Correlation Between Incyte and Ultragenyx

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

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

Diversification Opportunities for Incyte and Ultragenyx

0.26

Correlation Coefficient

Incyte  Ultragenyx

Modest diversification

The 3 months correlation between Incyte and Ultragenyx is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Incyte and Ultragenyx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultragenyx 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 Ultragenyx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultragenyx has no effect on the direction of Incyte i.e., Incyte and Ultragenyx go up and down completely randomly.

Pair Corralation between Incyte and Ultragenyx

Given the investment horizon of 90 days Incyte is expected to generate 0.85 times more return on investment than Ultragenyx. However, Incyte is 1.17 times less risky than Ultragenyx. It trades about 0.01 of its potential returns per unit of risk. Ultragenyx is currently generating about -0.08 per unit of risk. If you would invest  7,459  in Incyte on November 29, 2024 and sell it today you would lose (29.00) from holding Incyte or give up 0.39% of portfolio value over 90 days.

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

Incyte  vs.  Ultragenyx

Incyte

Risk-Adjusted Performance

Very Weak

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

Ultragenyx

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultragenyx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Incyte and Ultragenyx

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

The idea behind Incyte and Ultragenyx 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.