Correlation Between Vertex Pharmaceuticals and WUXI BIOLOGICS

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

By analyzing existing cross correlation between Vertex Pharmaceuticals Incorporated and WUXI BIOLOGICS UNSPADR2, you can compare the effects of market volatilities on Vertex Pharmaceuticals and WUXI BIOLOGICS 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 WUXI BIOLOGICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertex Pharmaceuticals and WUXI BIOLOGICS.

Diversification Opportunities for Vertex Pharmaceuticals and WUXI BIOLOGICS

0.8

Correlation Coefficient

Vertex Pharmaceuticals  WUXI BIOLOGICS

Very poor diversification

The 3 months correlation between Vertex and WUXI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Pharmaceuticals Incorpo and WUXI BIOLOGICS UNSPADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WUXI BIOLOGICS UNSPADR2 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 Incorporated are associated (or correlated) with WUXI BIOLOGICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WUXI BIOLOGICS UNSPADR2 has no effect on the direction of Vertex Pharmaceuticals i.e., Vertex Pharmaceuticals and WUXI BIOLOGICS go up and down completely randomly.

Pair Corralation between Vertex Pharmaceuticals and WUXI BIOLOGICS

Assuming the 90 days horizon Vertex Pharmaceuticals is expected to generate 1.95 times less return on investment than WUXI BIOLOGICS. But when comparing it to its historical volatility, Vertex Pharmaceuticals Incorporated is 2.85 times less risky than WUXI BIOLOGICS. It trades about 0.21 of its potential returns per unit of risk. WUXI BIOLOGICS UNSPADR2 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  428.00  in WUXI BIOLOGICS UNSPADR2 on December 26, 2024 and sell it today you would earn a total of  167.00  from holding WUXI BIOLOGICS UNSPADR2 or generate 39.02% return on investment over 90 days.

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

Vertex Pharmaceuticals Incorpo  vs.  WUXI BIOLOGICS UNSPADR2

Vertex Pharmaceuticals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Pharmaceuticals Incorporated are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vertex Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

WUXI BIOLOGICS UNSPADR2

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WUXI BIOLOGICS UNSPADR2 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WUXI BIOLOGICS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vertex Pharmaceuticals and WUXI BIOLOGICS

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

The idea behind Vertex Pharmaceuticals Incorporated and WUXI BIOLOGICS UNSPADR2 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.