Correlation Between Ventyx Biosciences and Emergent Biosolutions

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

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

Diversification Opportunities for Ventyx Biosciences and Emergent Biosolutions

-0.06

Correlation Coefficient

Ventyx Biosciences  Emergent Biosolutions

Good diversification

The 3 months correlation between Ventyx and Emergent is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ventyx Biosciences and Emergent Biosolutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Biosolutions and Ventyx Biosciences 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 Ventyx Biosciences are associated (or correlated) with Emergent Biosolutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Biosolutions has no effect on the direction of Ventyx Biosciences i.e., Ventyx Biosciences and Emergent Biosolutions go up and down completely randomly.

Pair Corralation between Ventyx Biosciences and Emergent Biosolutions

Given the investment horizon of 90 days Ventyx Biosciences is expected to under-perform the Emergent Biosolutions. But the stock apears to be less risky and, when comparing its historical volatility, Ventyx Biosciences is 1.11 times less risky than Emergent Biosolutions. The stock trades about -0.02 of its potential returns per unit of risk. The Emergent Biosolutions is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,202  in Emergent Biosolutions on September 21, 2024 and sell it today you would lose (396.00) from holding Emergent Biosolutions or give up 32.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Ventyx Biosciences  vs.  Emergent Biosolutions

Ventyx Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ventyx Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Ventyx Biosciences is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Emergent Biosolutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ventyx Biosciences and Emergent Biosolutions

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

The idea behind Ventyx Biosciences and Emergent Biosolutions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.