Correlation Between Regeneron Pharmaceuticals and AMERICAN

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

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

Diversification Opportunities for Regeneron Pharmaceuticals and AMERICAN

0.0

Correlation Coefficient

Regeneron Pharmaceuticals  AMERICAN

Pay attention - limited upside

The 3 months correlation between Regeneron and AMERICAN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Regeneron Pharmaceuticals and AMERICAN INTL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN INTL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN INTL GROUP has no effect on the direction of Regeneron Pharmaceuticals i.e., Regeneron Pharmaceuticals and AMERICAN go up and down completely randomly.

Pair Corralation between Regeneron Pharmaceuticals and AMERICAN

Given the investment horizon of 90 days Regeneron Pharmaceuticals is expected to generate 711.93 times less return on investment than AMERICAN. But when comparing it to its historical volatility, Regeneron Pharmaceuticals is 75.35 times less risky than AMERICAN. It trades about 0.01 of its potential returns per unit of risk. AMERICAN INTL GROUP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,139  in AMERICAN INTL GROUP on October 10, 2024 and sell it today you would lose (623.00) from holding AMERICAN INTL GROUP or give up 5.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	36.16%
Values	Daily Returns

Regeneron Pharmaceuticals  vs.  AMERICAN INTL GROUP

Regeneron Pharmaceuticals

Risk-Adjusted Performance

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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 weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AMERICAN INTL GROUP

Risk-Adjusted Performance

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Very Weak

Over the last 90 days AMERICAN INTL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN 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 AMERICAN

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

The idea behind Regeneron Pharmaceuticals and AMERICAN INTL GROUP 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.