Correlation Between NYSE Composite and Alnylam Pharmaceuticals

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

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

Diversification Opportunities for NYSE Composite and Alnylam Pharmaceuticals

0.66

Correlation Coefficient

NYSE Composite  Alnylam Pharmaceuticals

Poor diversification

The 3 months correlation between NYSE and Alnylam is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Alnylam Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alnylam Pharmaceuticals and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Alnylam Pharmaceuticals go up and down completely randomly.

Pair Corralation between NYSE Composite and Alnylam Pharmaceuticals

Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.22 times less return on investment than Alnylam Pharmaceuticals. But when comparing it to its historical volatility, NYSE Composite is 3.37 times less risky than Alnylam Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Alnylam Pharmaceuticals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24,879  in Alnylam Pharmaceuticals on November 20, 2024 and sell it today you would earn a total of  766.00  from holding Alnylam Pharmaceuticals or generate 3.08% return on investment over 90 days.

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

NYSE Composite  vs.  Alnylam Pharmaceuticals

Pair Trading with NYSE Composite and Alnylam Pharmaceuticals

The main advantage of trading using opposite NYSE Composite and Alnylam Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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 NYSE Composite 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.