Correlation Between Biomarin Pharmaceutical and Incyte

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

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

Diversification Opportunities for Biomarin Pharmaceutical and Incyte

-0.03

Correlation Coefficient

Biomarin Pharmaceutical  Incyte

Good diversification

The 3 months correlation between Biomarin and Incyte is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Biomarin Pharmaceutical and Incyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incyte and Biomarin Pharmaceutical 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 Biomarin Pharmaceutical are associated (or correlated) with Incyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incyte has no effect on the direction of Biomarin Pharmaceutical i.e., Biomarin Pharmaceutical and Incyte go up and down completely randomly.

Pair Corralation between Biomarin Pharmaceutical and Incyte

Given the investment horizon of 90 days Biomarin Pharmaceutical is expected to under-perform the Incyte. In addition to that, Biomarin Pharmaceutical is 1.17 times more volatile than Incyte. It trades about -0.15 of its total potential returns per unit of risk. Incyte is currently generating about -0.06 per unit of volatility. If you would invest  6,100  in Incyte on February 27, 2024 and sell it today you would lose (369.00) from holding Incyte or give up 6.05% of portfolio value over 90 days.

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

Biomarin Pharmaceutical  vs.  Incyte

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Incyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Incyte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Incyte is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Biomarin Pharmaceutical and Incyte

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

The idea behind Biomarin Pharmaceutical and Incyte 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.