Correlation Between Moderna and Arrowhead Pharmaceuticals

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

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

Diversification Opportunities for Moderna and Arrowhead Pharmaceuticals

0.38

Correlation Coefficient

Moderna  Arrowhead Pharmaceuticals

Weak diversification

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

Pair Corralation between Moderna and Arrowhead Pharmaceuticals

Given the investment horizon of 90 days Moderna is expected to under-perform the Arrowhead Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Moderna is 1.28 times less risky than Arrowhead Pharmaceuticals. The stock trades about -0.23 of its potential returns per unit of risk. The Arrowhead Pharmaceuticals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,383  in Arrowhead Pharmaceuticals on August 30, 2024 and sell it today you would earn a total of  232.00  from holding Arrowhead Pharmaceuticals or generate 9.74% return on investment over 90 days.

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

Moderna  vs.  Arrowhead Pharmaceuticals

Moderna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Arrowhead Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrowhead Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Arrowhead Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moderna and Arrowhead Pharmaceuticals

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

The idea behind Moderna and Arrowhead 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.