Correlation Between Alexion Pharmaceuticals and Vertex Pharmaceuticals

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

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

Diversification Opportunities for Alexion Pharmaceuticals and Vertex Pharmaceuticals

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Correlation Coefficient

Alexion Pharmaceuticals  Vertex Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Alexion and Vertex is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alexion Pharmaceuticals and Vertex Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals and Alexion 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 Alexion Pharmaceuticals are associated (or correlated) with Vertex Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceuticals has no effect on the direction of Alexion Pharmaceuticals i.e., Alexion Pharmaceuticals and Vertex Pharmaceuticals go up and down completely randomly.

Pair Corralation between Alexion Pharmaceuticals and Vertex Pharmaceuticals

If you would invest  35,405  in Vertex Pharmaceuticals on January 24, 2024 and sell it today you would earn a total of  5,086  from holding Vertex Pharmaceuticals or generate 14.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Alexion Pharmaceuticals  vs.  Vertex Pharmaceuticals

Alexion Pharmaceuticals

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Alexion Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alexion Pharmaceuticals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vertex Pharmaceuticals

Risk-Adjusted Performance

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Very Weak

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

Pair Trading with Alexion Pharmaceuticals and Vertex Pharmaceuticals

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

The idea behind Alexion Pharmaceuticals and Vertex Pharmaceuticals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.