Correlation Between Viatris and Incyte

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

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

Diversification Opportunities for Viatris and Incyte

0.69

Correlation Coefficient

Viatris  Incyte

Poor diversification

The 3 months correlation between Viatris and Incyte is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Viatris and Incyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incyte and Viatris 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 Viatris are associated (or correlated) with Incyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incyte has no effect on the direction of Viatris i.e., Viatris and Incyte go up and down completely randomly.

Pair Corralation between Viatris and Incyte

Given the investment horizon of 90 days Viatris is expected to generate 1.22 times less return on investment than Incyte. But when comparing it to its historical volatility, Viatris is 1.1 times less risky than Incyte. It trades about 0.08 of its potential returns per unit of risk. Incyte is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,631  in Incyte on August 31, 2024 and sell it today you would earn a total of  914.00  from holding Incyte or generate 13.78% return on investment over 90 days.

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

Viatris  vs.  Incyte

Viatris

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Viatris may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Incyte

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Incyte are ranked lower than 7 (%) 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.

Pair Trading with Viatris and Incyte

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

The idea behind Viatris and Incyte 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.