Correlation Between Regeneron Pharmaceuticals and HCW Biologics

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

By analyzing existing cross correlation between Regeneron Pharmaceuticals and HCW Biologics, you can compare the effects of market volatilities on Regeneron Pharmaceuticals and HCW Biologics 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 HCW Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regeneron Pharmaceuticals and HCW Biologics.

Diversification Opportunities for Regeneron Pharmaceuticals and HCW Biologics

0.37

Correlation Coefficient

Regeneron Pharmaceuticals  HCW Biologics

Weak diversification

The 3 months correlation between Regeneron and HCW is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Regeneron Pharmaceuticals and HCW Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCW Biologics 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 HCW Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCW Biologics has no effect on the direction of Regeneron Pharmaceuticals i.e., Regeneron Pharmaceuticals and HCW Biologics go up and down completely randomly.

Pair Corralation between Regeneron Pharmaceuticals and HCW Biologics

Given the investment horizon of 90 days Regeneron Pharmaceuticals is expected to generate 0.26 times more return on investment than HCW Biologics. However, Regeneron Pharmaceuticals is 3.86 times less risky than HCW Biologics. It trades about 0.02 of its potential returns per unit of risk. HCW Biologics is currently generating about -0.04 per unit of risk. If you would invest  74,923  in Regeneron Pharmaceuticals on August 13, 2024 and sell it today you would earn a total of  7,919  from holding Regeneron Pharmaceuticals or generate 10.57% return on investment over 90 days.

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

Regeneron Pharmaceuticals  vs.  HCW Biologics

Regeneron Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regeneron 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

HCW Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCW Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Regeneron Pharmaceuticals and HCW Biologics

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

The idea behind Regeneron Pharmaceuticals and HCW Biologics 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.