Correlation Between Wave Life and Biomarin Pharmaceutical

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

By analyzing existing cross correlation between Wave Life Sciences and Biomarin Pharmaceutical, you can compare the effects of market volatilities on Wave Life and Biomarin Pharmaceutical 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 Wave Life with a short position of Biomarin Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wave Life and Biomarin Pharmaceutical.

Diversification Opportunities for Wave Life and Biomarin Pharmaceutical

0.11

Correlation Coefficient

Wave Life  Biomarin Pharmaceutical

Average diversification

The 3 months correlation between Wave and Biomarin is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Wave Life Sciences and Biomarin Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomarin Pharmaceutical and Wave Life 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 Wave Life Sciences are associated (or correlated) with Biomarin Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomarin Pharmaceutical has no effect on the direction of Wave Life i.e., Wave Life and Biomarin Pharmaceutical go up and down completely randomly.

Pair Corralation between Wave Life and Biomarin Pharmaceutical

Considering the 90-day investment horizon Wave Life Sciences is expected to under-perform the Biomarin Pharmaceutical. In addition to that, Wave Life is 2.06 times more volatile than Biomarin Pharmaceutical. It trades about -0.14 of its total potential returns per unit of risk. Biomarin Pharmaceutical is currently generating about 0.05 per unit of volatility. If you would invest  6,603  in Biomarin Pharmaceutical on November 29, 2024 and sell it today you would earn a total of  278.00  from holding Biomarin Pharmaceutical or generate 4.21% return on investment over 90 days.

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

Wave Life Sciences  vs.  Biomarin Pharmaceutical

Wave Life Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wave Life Sciences 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 basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Biomarin Pharmaceutical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Biomarin Pharmaceutical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Biomarin Pharmaceutical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wave Life and Biomarin Pharmaceutical

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

The idea behind Wave Life Sciences and Biomarin Pharmaceutical 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.