Correlation Between Vaxcyte and Larimar Therapeutics

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

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

Diversification Opportunities for Vaxcyte and Larimar Therapeutics

0.02

Correlation Coefficient

Vaxcyte  Larimar Therapeutics

Significant diversification

The 3 months correlation between Vaxcyte and Larimar is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Vaxcyte and Larimar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larimar Therapeutics and Vaxcyte 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 Vaxcyte are associated (or correlated) with Larimar Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larimar Therapeutics has no effect on the direction of Vaxcyte i.e., Vaxcyte and Larimar Therapeutics go up and down completely randomly.

Pair Corralation between Vaxcyte and Larimar Therapeutics

Given the investment horizon of 90 days Vaxcyte is expected to generate 0.89 times more return on investment than Larimar Therapeutics. However, Vaxcyte is 1.12 times less risky than Larimar Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Larimar Therapeutics is currently generating about -0.02 per unit of risk. If you would invest  8,076  in Vaxcyte on August 30, 2024 and sell it today you would earn a total of  1,322  from holding Vaxcyte or generate 16.37% return on investment over 90 days.

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

Vaxcyte  vs.  Larimar Therapeutics

Vaxcyte

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vaxcyte are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vaxcyte showed solid returns over the last few months and may actually be approaching a breakup point.

Larimar Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Larimar Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Vaxcyte and Larimar Therapeutics

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

The idea behind Vaxcyte and Larimar Therapeutics 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.