Correlation Between CSL and Moderna

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

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

Diversification Opportunities for CSL and Moderna

0.72

Correlation Coefficient

CSL  Moderna

Poor diversification

The 3 months correlation between CSL and Moderna is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna and CSL 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 CSL Limited are associated (or correlated) with Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of CSL i.e., CSL and Moderna go up and down completely randomly.

Pair Corralation between CSL and Moderna

Assuming the 90 days horizon CSL Limited is expected to generate 0.37 times more return on investment than Moderna. However, CSL Limited is 2.68 times less risky than Moderna. It trades about -0.07 of its potential returns per unit of risk. Moderna is currently generating about -0.19 per unit of risk. If you would invest  17,588  in CSL Limited on September 23, 2024 and sell it today you would lose (1,044) from holding CSL Limited or give up 5.94% of portfolio value over 90 days.

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

CSL Limited  vs.  Moderna

CSL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CSL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with CSL and Moderna

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

The idea behind CSL Limited and Moderna 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.