Correlation Between Vertex Pharmaceuticals and Biomm SA

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

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

Diversification Opportunities for Vertex Pharmaceuticals and Biomm SA

-0.36

Correlation Coefficient

Vertex Pharmaceuticals  Biomm SA

Very good diversification

The 3 months correlation between Vertex and Biomm is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Pharmaceuticals Incorpo and Biomm SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomm SA and Vertex Pharmaceuticals 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 Vertex Pharmaceuticals Incorporated are associated (or correlated) with Biomm SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomm SA has no effect on the direction of Vertex Pharmaceuticals i.e., Vertex Pharmaceuticals and Biomm SA go up and down completely randomly.

Pair Corralation between Vertex Pharmaceuticals and Biomm SA

Assuming the 90 days trading horizon Vertex Pharmaceuticals Incorporated is expected to generate 0.98 times more return on investment than Biomm SA. However, Vertex Pharmaceuticals Incorporated is 1.02 times less risky than Biomm SA. It trades about -0.13 of its potential returns per unit of risk. Biomm SA is currently generating about -0.22 per unit of risk. If you would invest  66,690  in Vertex Pharmaceuticals Incorporated on September 24, 2024 and sell it today you would lose (6,232) from holding Vertex Pharmaceuticals Incorporated or give up 9.34% of portfolio value over 90 days.

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

Vertex Pharmaceuticals Incorpo  vs.  Biomm SA

Vertex Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vertex Pharmaceuticals Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vertex Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Biomm SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomm SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Vertex Pharmaceuticals and Biomm SA

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

The idea behind Vertex Pharmaceuticals Incorporated and Biomm SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..