Correlation Between Vertex Pharmaceuticals and Relay Therapeutics

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

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

Diversification Opportunities for Vertex Pharmaceuticals and Relay Therapeutics

0.58

Correlation Coefficient

Vertex Pharmaceuticals  Relay Therapeutics

Very weak diversification

The 3 months correlation between Vertex and Relay is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Pharmaceuticals and Relay Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relay Therapeutics and Vertex 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 Vertex Pharmaceuticals are associated (or correlated) with Relay Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relay Therapeutics has no effect on the direction of Vertex Pharmaceuticals i.e., Vertex Pharmaceuticals and Relay Therapeutics go up and down completely randomly.

Pair Corralation between Vertex Pharmaceuticals and Relay Therapeutics

Given the investment horizon of 90 days Vertex Pharmaceuticals is expected to under-perform the Relay Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Vertex Pharmaceuticals is 1.87 times less risky than Relay Therapeutics. The stock trades about -0.05 of its potential returns per unit of risk. The Relay Therapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  332.00  in Relay Therapeutics on May 5, 2025 and sell it today you would earn a total of  4.00  from holding Relay Therapeutics or generate 1.2% return on investment over 90 days.

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

Vertex Pharmaceuticals  vs.  Relay Therapeutics

Vertex Pharmaceuticals

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Relay Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Relay Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Relay Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vertex Pharmaceuticals and Relay Therapeutics

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

The idea behind Vertex Pharmaceuticals and Relay 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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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.