Correlation Between Vertex Pharmaceuticals and BioNTech

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

Diversification Opportunities for Vertex Pharmaceuticals and BioNTech

-0.19

Correlation Coefficient

Vertex Pharmaceuticals  BioNTech

Good diversification

The 3 months correlation between Vertex and BioNTech is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Pharmaceuticals Incorpo and BioNTech SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioNTech SE 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 BioNTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioNTech SE has no effect on the direction of Vertex Pharmaceuticals i.e., Vertex Pharmaceuticals and BioNTech go up and down completely randomly.

Pair Corralation between Vertex Pharmaceuticals and BioNTech

Assuming the 90 days horizon Vertex Pharmaceuticals Incorporated is expected to under-perform the BioNTech. In addition to that, Vertex Pharmaceuticals is 1.14 times more volatile than BioNTech SE. It trades about -0.18 of its total potential returns per unit of risk. BioNTech SE is currently generating about 0.01 per unit of volatility. If you would invest  10,760  in BioNTech SE on September 23, 2024 and sell it today you would lose (10.00) from holding BioNTech SE or give up 0.09% 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.  BioNTech SE

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BioNTech SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BioNTech SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BioNTech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vertex Pharmaceuticals and BioNTech

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

The idea behind Vertex Pharmaceuticals Incorporated and BioNTech SE 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.