Correlation Between Moderna and Novavax

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

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

Diversification Opportunities for Moderna and Novavax

0.85

Correlation Coefficient

Moderna  Novavax

Very poor diversification

The 3 months correlation between Moderna and Novavax is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Moderna and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax and Moderna 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 Moderna are associated (or correlated) with Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Moderna i.e., Moderna and Novavax go up and down completely randomly.

Pair Corralation between Moderna and Novavax

Assuming the 90 days horizon Moderna is expected to under-perform the Novavax. But the stock apears to be less risky and, when comparing its historical volatility, Moderna is 2.17 times less risky than Novavax. The stock trades about -0.05 of its potential returns per unit of risk. The Novavax is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  758.00  in Novavax on September 12, 2024 and sell it today you would earn a total of  73.00  from holding Novavax or generate 9.63% return on investment over 90 days.

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

Moderna  vs.  Novavax

Moderna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Novavax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novavax has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Moderna and Novavax

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

The idea behind Moderna and Novavax 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.