Correlation Between Ultragenyx and Insmed

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

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

Diversification Opportunities for Ultragenyx and Insmed

0.41

Correlation Coefficient

Ultragenyx  Insmed

Very weak diversification

The 3 months correlation between Ultragenyx and Insmed is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ultragenyx and Insmed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insmed Inc and Ultragenyx 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 Ultragenyx are associated (or correlated) with Insmed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insmed Inc has no effect on the direction of Ultragenyx i.e., Ultragenyx and Insmed go up and down completely randomly.

Pair Corralation between Ultragenyx and Insmed

Given the investment horizon of 90 days Ultragenyx is expected to under-perform the Insmed. But the stock apears to be less risky and, when comparing its historical volatility, Ultragenyx is 1.28 times less risky than Insmed. The stock trades about -0.12 of its potential returns per unit of risk. The Insmed Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,331  in Insmed Inc on September 3, 2024 and sell it today you would earn a total of  185.00  from holding Insmed Inc or generate 2.52% return on investment over 90 days.

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

Ultragenyx  vs.  Insmed Inc

Ultragenyx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultragenyx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Insmed Inc

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Ultragenyx and Insmed

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

The idea behind Ultragenyx and Insmed Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.