Correlation Between Vaxcyte and Rhythm Pharmaceuticals

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

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

Diversification Opportunities for Vaxcyte and Rhythm Pharmaceuticals

-0.42

Correlation Coefficient

Vaxcyte  Rhythm Pharmaceuticals

Very good diversification

The 3 months correlation between Vaxcyte and Rhythm is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vaxcyte and Rhythm Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rhythm Pharmaceuticals and Vaxcyte 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 Vaxcyte are associated (or correlated) with Rhythm Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rhythm Pharmaceuticals has no effect on the direction of Vaxcyte i.e., Vaxcyte and Rhythm Pharmaceuticals go up and down completely randomly.

Pair Corralation between Vaxcyte and Rhythm Pharmaceuticals

Given the investment horizon of 90 days Vaxcyte is expected to under-perform the Rhythm Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Vaxcyte is 1.44 times less risky than Rhythm Pharmaceuticals. The stock trades about -0.1 of its potential returns per unit of risk. The Rhythm Pharmaceuticals is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,595  in Rhythm Pharmaceuticals on September 3, 2024 and sell it today you would earn a total of  1,609  from holding Rhythm Pharmaceuticals or generate 35.02% return on investment over 90 days.

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

Vaxcyte  vs.  Rhythm Pharmaceuticals

Vaxcyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaxcyte 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 fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Rhythm Pharmaceuticals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rhythm Pharmaceuticals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Rhythm Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vaxcyte and Rhythm Pharmaceuticals

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

The idea behind Vaxcyte and Rhythm 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.