Correlation Between Natera and Alkermes Plc

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

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

Diversification Opportunities for Natera and Alkermes Plc

-0.62

Correlation Coefficient

Natera  Alkermes Plc

Excellent diversification

The 3 months correlation between Natera and Alkermes is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Natera Inc and Alkermes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkermes Plc and Natera 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 Natera Inc are associated (or correlated) with Alkermes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkermes Plc has no effect on the direction of Natera i.e., Natera and Alkermes Plc go up and down completely randomly.

Pair Corralation between Natera and Alkermes Plc

Given the investment horizon of 90 days Natera Inc is expected to generate 2.05 times more return on investment than Alkermes Plc. However, Natera is 2.05 times more volatile than Alkermes Plc. It trades about 0.31 of its potential returns per unit of risk. Alkermes Plc is currently generating about -0.12 per unit of risk. If you would invest  9,415  in Natera Inc on March 2, 2024 and sell it today you would earn a total of  1,597  from holding Natera Inc or generate 16.96% return on investment over 90 days.

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

Natera Inc  vs.  Alkermes Plc

Natera Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

Alkermes Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkermes Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Natera and Alkermes Plc

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

The idea behind Natera Inc and Alkermes Plc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.