Correlation Between Novavax and Moderna

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

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

Diversification Opportunities for Novavax and Moderna

0.78

Correlation Coefficient

Novavax  Moderna

Poor diversification

The 3 months correlation between Novavax and Moderna is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Novavax and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna and Novavax 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 Novavax are associated (or correlated) with Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of Novavax i.e., Novavax and Moderna go up and down completely randomly.

Pair Corralation between Novavax and Moderna

Given the investment horizon of 90 days Novavax is expected to generate 1.56 times more return on investment than Moderna. However, Novavax is 1.56 times more volatile than Moderna. It trades about -0.08 of its potential returns per unit of risk. Moderna is currently generating about -0.23 per unit of risk. If you would invest  1,238  in Novavax on August 30, 2024 and sell it today you would lose (376.00) from holding Novavax or give up 30.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Novavax  vs.  Moderna

Novavax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novavax 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 fairly 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.

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.

Pair Trading with Novavax and Moderna

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

The idea behind Novavax and Moderna 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.