Correlation Between Alnylam Pharmaceuticals and Incyte

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

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

Diversification Opportunities for Alnylam Pharmaceuticals and Incyte

-0.2

Correlation Coefficient

Alnylam Pharmaceuticals  Incyte

Good diversification

The 3 months correlation between Alnylam and Incyte is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alnylam Pharmaceuticals and Incyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incyte and Alnylam 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 Alnylam Pharmaceuticals are associated (or correlated) with Incyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incyte has no effect on the direction of Alnylam Pharmaceuticals i.e., Alnylam Pharmaceuticals and Incyte go up and down completely randomly.

Pair Corralation between Alnylam Pharmaceuticals and Incyte

Given the investment horizon of 90 days Alnylam Pharmaceuticals is expected to generate 10.21 times less return on investment than Incyte. But when comparing it to its historical volatility, Alnylam Pharmaceuticals is 1.16 times less risky than Incyte. It trades about 0.01 of its potential returns per unit of risk. Incyte is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,631  in Incyte on August 31, 2024 and sell it today you would earn a total of  914.00  from holding Incyte or generate 13.78% return on investment over 90 days.

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

Alnylam Pharmaceuticals  vs.  Incyte

Alnylam Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Incyte

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Incyte are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Incyte showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alnylam Pharmaceuticals and Incyte

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

The idea behind Alnylam Pharmaceuticals and Incyte 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.