Correlation Between Regeneron Pharmaceuticals and Sarepta Therapeutics
Can any of the company-specific risk be diversified away by investing in both Regeneron Pharmaceuticals and Sarepta Therapeutics 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 Regeneron Pharmaceuticals and Sarepta Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regeneron Pharmaceuticals and Sarepta Therapeutics, you can compare the effects of market volatilities on Regeneron Pharmaceuticals and Sarepta Therapeutics 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 Regeneron Pharmaceuticals with a short position of Sarepta Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regeneron Pharmaceuticals and Sarepta Therapeutics.
Diversification Opportunities for Regeneron Pharmaceuticals and Sarepta Therapeutics
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Regeneron and Sarepta is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Regeneron Pharmaceuticals and Sarepta Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarepta Therapeutics and Regeneron 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 Regeneron Pharmaceuticals are associated (or correlated) with Sarepta Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarepta Therapeutics has no effect on the direction of Regeneron Pharmaceuticals i.e., Regeneron Pharmaceuticals and Sarepta Therapeutics go up and down completely randomly.
Pair Corralation between Regeneron Pharmaceuticals and Sarepta Therapeutics
Given the investment horizon of 90 days Regeneron Pharmaceuticals is expected to under-perform the Sarepta Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Regeneron Pharmaceuticals is 1.08 times less risky than Sarepta Therapeutics. The stock trades about -0.48 of its potential returns per unit of risk. The Sarepta Therapeutics is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest 12,988 in Sarepta Therapeutics on August 24, 2024 and sell it today you would lose (1,938) from holding Sarepta Therapeutics or give up 14.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regeneron Pharmaceuticals vs. Sarepta Therapeutics
Performance |
| Timeline |
| Regeneron Pharmaceuticals |
| Sarepta Therapeutics |
Regeneron Pharmaceuticals and Sarepta Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regeneron Pharmaceuticals and Sarepta Therapeutics
The main advantage of trading using opposite Regeneron Pharmaceuticals and Sarepta Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regeneron Pharmaceuticals position performs unexpectedly, Sarepta Therapeutics 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 Sarepta Therapeutics will offset losses from the drop in Sarepta Therapeutics' long position.The idea behind Regeneron Pharmaceuticals and Sarepta Therapeutics 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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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 Stocks Directory module to find actively traded stocks across global markets.
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