Correlation Between Jazz Pharmaceuticals and Incyte

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

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

Diversification Opportunities for Jazz Pharmaceuticals and Incyte

-0.38

Correlation Coefficient

Jazz Pharmaceuticals  Incyte

Very good diversification

The 3 months correlation between Jazz and Incyte is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Jazz Pharmaceuticals PLC and Incyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incyte and Jazz Pharmaceuticals 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 Jazz Pharmaceuticals PLC are associated (or correlated) with Incyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incyte has no effect on the direction of Jazz Pharmaceuticals i.e., Jazz Pharmaceuticals and Incyte go up and down completely randomly.

Pair Corralation between Jazz Pharmaceuticals and Incyte

Given the investment horizon of 90 days Jazz Pharmaceuticals PLC is expected to generate 0.81 times more return on investment than Incyte. However, Jazz Pharmaceuticals PLC is 1.23 times less risky than Incyte. It trades about 0.03 of its potential returns per unit of risk. Incyte is currently generating about -0.07 per unit of risk. If you would invest  12,297  in Jazz Pharmaceuticals PLC on December 28, 2024 and sell it today you would earn a total of  343.00  from holding Jazz Pharmaceuticals PLC or generate 2.79% return on investment over 90 days.

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

Jazz Pharmaceuticals PLC  vs.  Incyte

Jazz Pharmaceuticals PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Jazz Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Jazz Pharmaceuticals and Incyte

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

The idea behind Jazz Pharmaceuticals PLC and Incyte 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.