Correlation Between Vericel Corp and Xencor

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

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

Diversification Opportunities for Vericel Corp and Xencor

0.65

Correlation Coefficient

Vericel Corp  Xencor

Poor diversification

The 3 months correlation between Vericel and Xencor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vericel Corp Ord and Xencor Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xencor Inc and Vericel Corp 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 Vericel Corp Ord are associated (or correlated) with Xencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xencor Inc has no effect on the direction of Vericel Corp i.e., Vericel Corp and Xencor go up and down completely randomly.

Pair Corralation between Vericel Corp and Xencor

Given the investment horizon of 90 days Vericel Corp is expected to generate 2.28 times less return on investment than Xencor. But when comparing it to its historical volatility, Vericel Corp Ord is 1.29 times less risky than Xencor. It trades about 0.12 of its potential returns per unit of risk. Xencor Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,663  in Xencor Inc on September 4, 2024 and sell it today you would earn a total of  1,021  from holding Xencor Inc or generate 61.4% return on investment over 90 days.

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

Vericel Corp Ord  vs.  Xencor Inc

Vericel Corp Ord

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vericel Corp Ord are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Vericel Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Xencor Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xencor Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Xencor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vericel Corp and Xencor

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

The idea behind Vericel Corp Ord and Xencor Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.