Correlation Between Vertex Pharmaceuticals and Moderna

Can any of the company-specific risk be diversified away by investing in both Vertex Pharmaceuticals and Moderna 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 Moderna 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 Moderna, you can compare the effects of market volatilities on Vertex Pharmaceuticals and Moderna 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 Moderna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertex Pharmaceuticals and Moderna.

Diversification Opportunities for Vertex Pharmaceuticals and Moderna

-0.48

Correlation Coefficient

Vertex Pharmaceuticals  Moderna

Very good diversification

The 3 months correlation between Vertex and Moderna is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Pharmaceuticals Incorpo and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of Vertex Pharmaceuticals i.e., Vertex Pharmaceuticals and Moderna go up and down completely randomly.

Pair Corralation between Vertex Pharmaceuticals and Moderna

Assuming the 90 days horizon Vertex Pharmaceuticals Incorporated is expected to generate 0.57 times more return on investment than Moderna. However, Vertex Pharmaceuticals Incorporated is 1.76 times less risky than Moderna. It trades about 0.04 of its potential returns per unit of risk. Moderna is currently generating about -0.19 per unit of risk. If you would invest  42,645  in Vertex Pharmaceuticals Incorporated on September 20, 2024 and sell it today you would earn a total of  1,835  from holding Vertex Pharmaceuticals Incorporated or generate 4.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Vertex Pharmaceuticals Incorpo  vs.  Moderna

Vertex Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Pharmaceuticals Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vertex Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Moderna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vertex Pharmaceuticals and Moderna

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

The idea behind Vertex Pharmaceuticals Incorporated and Moderna 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.