Correlation Between Vertex Pharmaceuticals and Biostem Technologies

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

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

Diversification Opportunities for Vertex Pharmaceuticals and Biostem Technologies

-0.32

Correlation Coefficient

Vertex Pharmaceuticals  Biostem Technologies

Very good diversification

The 3 months correlation between Vertex and Biostem is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Pharmaceuticals and Biostem Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biostem Technologies and Vertex 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 Vertex Pharmaceuticals are associated (or correlated) with Biostem Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biostem Technologies has no effect on the direction of Vertex Pharmaceuticals i.e., Vertex Pharmaceuticals and Biostem Technologies go up and down completely randomly.

Pair Corralation between Vertex Pharmaceuticals and Biostem Technologies

Given the investment horizon of 90 days Vertex Pharmaceuticals is expected to generate 0.28 times more return on investment than Biostem Technologies. However, Vertex Pharmaceuticals is 3.6 times less risky than Biostem Technologies. It trades about 0.3 of its potential returns per unit of risk. Biostem Technologies is currently generating about -0.11 per unit of risk. If you would invest  39,664  in Vertex Pharmaceuticals on December 19, 2024 and sell it today you would earn a total of  11,588  from holding Vertex Pharmaceuticals or generate 29.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Vertex Pharmaceuticals  vs.  Biostem Technologies

Vertex Pharmaceuticals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Pharmaceuticals are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vertex Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Biostem Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biostem Technologies 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Vertex Pharmaceuticals and Biostem Technologies

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

The idea behind Vertex Pharmaceuticals and Biostem Technologies 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.