Correlation Between Biomarin Pharmaceutical and Ionis Pharmaceuticals

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

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

Diversification Opportunities for Biomarin Pharmaceutical and Ionis Pharmaceuticals

0.9

Correlation Coefficient

Biomarin Pharmaceutical  Ionis Pharmaceuticals

Almost no diversification

The 3 months correlation between Biomarin and Ionis is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Biomarin Pharmaceutical and Ionis Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ionis Pharmaceuticals and Biomarin Pharmaceutical 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 Biomarin Pharmaceutical are associated (or correlated) with Ionis Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ionis Pharmaceuticals has no effect on the direction of Biomarin Pharmaceutical i.e., Biomarin Pharmaceutical and Ionis Pharmaceuticals go up and down completely randomly.

Pair Corralation between Biomarin Pharmaceutical and Ionis Pharmaceuticals

Given the investment horizon of 90 days Biomarin Pharmaceutical is expected to under-perform the Ionis Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Biomarin Pharmaceutical is 1.02 times less risky than Ionis Pharmaceuticals. The stock trades about -0.19 of its potential returns per unit of risk. The Ionis Pharmaceuticals is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  4,731  in Ionis Pharmaceuticals on August 31, 2024 and sell it today you would lose (1,141) from holding Ionis Pharmaceuticals or give up 24.12% of portfolio value over 90 days.

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

Biomarin Pharmaceutical  vs.  Ionis Pharmaceuticals

Biomarin Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomarin Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ionis Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ionis Pharmaceuticals 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 comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Biomarin Pharmaceutical and Ionis Pharmaceuticals

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

The idea behind Biomarin Pharmaceutical and Ionis Pharmaceuticals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.