Correlation Between Incyte and Sarepta Therapeutics

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

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

Diversification Opportunities for Incyte and Sarepta Therapeutics

-0.41

Correlation Coefficient

Incyte  Sarepta Therapeutics

Very good diversification

The 3 months correlation between Incyte and Sarepta is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Incyte and Sarepta Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarepta Therapeutics and Incyte 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 Incyte are associated (or correlated) with Sarepta Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarepta Therapeutics has no effect on the direction of Incyte i.e., Incyte and Sarepta Therapeutics go up and down completely randomly.

Pair Corralation between Incyte and Sarepta Therapeutics

Given the investment horizon of 90 days Incyte is expected to generate 0.93 times more return on investment than Sarepta Therapeutics. However, Incyte is 1.08 times less risky than Sarepta Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Sarepta Therapeutics is currently generating about 0.01 per unit of risk. If you would invest  6,631  in Incyte on September 2, 2024 and sell it today you would earn a total of  828.00  from holding Incyte or generate 12.49% return on investment over 90 days.

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

Incyte  vs.  Sarepta Therapeutics

Incyte

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Incyte are ranked lower than 6 (%) 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.

Sarepta Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarepta Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sarepta Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Incyte and Sarepta Therapeutics

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

The idea behind Incyte and Sarepta Therapeutics 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.