Correlation Between Regeneron Pharmaceuticals and Novavax

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

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

Diversification Opportunities for Regeneron Pharmaceuticals and Novavax

0.38

Correlation Coefficient

Regeneron Pharmaceuticals  Novavax

Weak diversification

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

Pair Corralation between Regeneron Pharmaceuticals and Novavax

Given the investment horizon of 90 days Regeneron Pharmaceuticals is expected to under-perform the Novavax. But the stock apears to be less risky and, when comparing its historical volatility, Regeneron Pharmaceuticals is 2.28 times less risky than Novavax. The stock trades about -0.07 of its potential returns per unit of risk. The Novavax is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  793.00  in Novavax on December 30, 2024 and sell it today you would lose (93.00) from holding Novavax or give up 11.73% of portfolio value over 90 days.

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

Regeneron Pharmaceuticals  vs.  Novavax

Regeneron Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regeneron Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Novavax

Risk-Adjusted Performance

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 fairly strong basic indicators, Novavax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Regeneron Pharmaceuticals and Novavax

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

The idea behind Regeneron Pharmaceuticals and Novavax 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.