Correlation Between Vertex Pharmaceuticals and Diamyd Medical

Can any of the company-specific risk be diversified away by investing in both Vertex Pharmaceuticals and Diamyd Medical 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 Diamyd Medical 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 Diamyd Medical AB, you can compare the effects of market volatilities on Vertex Pharmaceuticals and Diamyd Medical 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 Diamyd Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertex Pharmaceuticals and Diamyd Medical.

Diversification Opportunities for Vertex Pharmaceuticals and Diamyd Medical

-0.43

Correlation Coefficient

Vertex Pharmaceuticals  Diamyd Medical

Very good diversification

The 3 months correlation between Vertex and Diamyd is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Pharmaceuticals Incorpo and Diamyd Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamyd Medical AB 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 Diamyd Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamyd Medical AB has no effect on the direction of Vertex Pharmaceuticals i.e., Vertex Pharmaceuticals and Diamyd Medical go up and down completely randomly.

Pair Corralation between Vertex Pharmaceuticals and Diamyd Medical

Assuming the 90 days horizon Vertex Pharmaceuticals Incorporated is expected to generate 0.49 times more return on investment than Diamyd Medical. However, Vertex Pharmaceuticals Incorporated is 2.06 times less risky than Diamyd Medical. It trades about 0.03 of its potential returns per unit of risk. Diamyd Medical AB is currently generating about -0.05 per unit of risk. If you would invest  43,110  in Vertex Pharmaceuticals Incorporated on September 3, 2024 and sell it today you would earn a total of  995.00  from holding Vertex Pharmaceuticals Incorporated or generate 2.31% return on investment over 90 days.

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

Vertex Pharmaceuticals Incorpo  vs.  Diamyd Medical AB

Vertex Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Pharmaceuticals Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vertex Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Diamyd Medical AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamyd Medical AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Vertex Pharmaceuticals and Diamyd Medical

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

The idea behind Vertex Pharmaceuticals Incorporated and Diamyd Medical AB 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.