Correlation Between Apellis Pharmaceuticals and Biomarin Pharmaceutical

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

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

Diversification Opportunities for Apellis Pharmaceuticals and Biomarin Pharmaceutical

0.85

Correlation Coefficient

Apellis Pharmaceuticals  Biomarin Pharmaceutical

Very poor diversification

The 3 months correlation between Apellis and Biomarin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Apellis Pharmaceuticals and Biomarin Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomarin Pharmaceutical and Apellis 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 Apellis Pharmaceuticals are associated (or correlated) with Biomarin Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomarin Pharmaceutical has no effect on the direction of Apellis Pharmaceuticals i.e., Apellis Pharmaceuticals and Biomarin Pharmaceutical go up and down completely randomly.

Pair Corralation between Apellis Pharmaceuticals and Biomarin Pharmaceutical

Given the investment horizon of 90 days Apellis Pharmaceuticals is expected to under-perform the Biomarin Pharmaceutical. In addition to that, Apellis Pharmaceuticals is 2.02 times more volatile than Biomarin Pharmaceutical. It trades about -0.37 of its total potential returns per unit of risk. Biomarin Pharmaceutical is currently generating about 0.07 per unit of volatility. If you would invest  6,913  in Biomarin Pharmaceutical on July 23, 2024 and sell it today you would earn a total of  98.00  from holding Biomarin Pharmaceutical or generate 1.42% return on investment over 90 days.

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

Apellis Pharmaceuticals  vs.  Biomarin Pharmaceutical

Apellis Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Biomarin Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomarin Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in November 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Apellis Pharmaceuticals and Biomarin Pharmaceutical

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

The idea behind Apellis Pharmaceuticals and Biomarin Pharmaceutical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.