Correlation Between Royalty Pharma and Ginkgo Bioworks

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

By analyzing existing cross correlation between Royalty Pharma Plc and Ginkgo Bioworks Holdings, you can compare the effects of market volatilities on Royalty Pharma and Ginkgo Bioworks 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 Royalty Pharma with a short position of Ginkgo Bioworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royalty Pharma and Ginkgo Bioworks.

Diversification Opportunities for Royalty Pharma and Ginkgo Bioworks

-0.4

Correlation Coefficient

Royalty Pharma  Ginkgo Bioworks

Very good diversification

The 3 months correlation between Royalty and Ginkgo is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Pharma Plc and Ginkgo Bioworks Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ginkgo Bioworks Holdings and Royalty Pharma 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 Royalty Pharma Plc are associated (or correlated) with Ginkgo Bioworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ginkgo Bioworks Holdings has no effect on the direction of Royalty Pharma i.e., Royalty Pharma and Ginkgo Bioworks go up and down completely randomly.

Pair Corralation between Royalty Pharma and Ginkgo Bioworks

Given the investment horizon of 90 days Royalty Pharma Plc is expected to under-perform the Ginkgo Bioworks. But the stock apears to be less risky and, when comparing its historical volatility, Royalty Pharma Plc is 5.99 times less risky than Ginkgo Bioworks. The stock trades about -0.15 of its potential returns per unit of risk. The Ginkgo Bioworks Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  809.00  in Ginkgo Bioworks Holdings on September 27, 2024 and sell it today you would earn a total of  128.00  from holding Ginkgo Bioworks Holdings or generate 15.82% return on investment over 90 days.

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

Royalty Pharma Plc  vs.  Ginkgo Bioworks Holdings

Royalty Pharma Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royalty Pharma Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ginkgo Bioworks Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ginkgo Bioworks Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Ginkgo Bioworks sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royalty Pharma and Ginkgo Bioworks

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

The idea behind Royalty Pharma Plc and Ginkgo Bioworks Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.