Correlation Between Insmed and Alnylam Pharmaceuticals

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

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

Diversification Opportunities for Insmed and Alnylam Pharmaceuticals

0.57

Correlation Coefficient

Insmed  Alnylam Pharmaceuticals

Very weak diversification

The 3 months correlation between Insmed and Alnylam is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Insmed Inc and Alnylam Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alnylam Pharmaceuticals and Insmed 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 Insmed Inc 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 Insmed i.e., Insmed and Alnylam Pharmaceuticals go up and down completely randomly.

Pair Corralation between Insmed and Alnylam Pharmaceuticals

Given the investment horizon of 90 days Insmed is expected to generate 1.19 times less return on investment than Alnylam Pharmaceuticals. But when comparing it to its historical volatility, Insmed Inc is 1.36 times less risky than Alnylam Pharmaceuticals. It trades about 0.1 of its potential returns per unit of risk. Alnylam Pharmaceuticals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  23,601  in Alnylam Pharmaceuticals on December 29, 2024 and sell it today you would earn a total of  3,501  from holding Alnylam Pharmaceuticals or generate 14.83% return on investment over 90 days.

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

Insmed Inc  vs.  Alnylam Pharmaceuticals

Insmed Inc

Risk-Adjusted Performance

OK

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

Alnylam Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alnylam Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Alnylam Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insmed and Alnylam Pharmaceuticals

The main advantage of trading using opposite Insmed and Alnylam Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insmed 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 Insmed Inc 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.