Correlation Between Sarepta Therapeutics and Alnylam Pharmaceuticals

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

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

Diversification Opportunities for Sarepta Therapeutics and Alnylam Pharmaceuticals

0.29

Correlation Coefficient

Sarepta Therapeutics  Alnylam Pharmaceuticals

Modest diversification

The 3 months correlation between Sarepta and Alnylam is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sarepta Therapeutics and Alnylam Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alnylam Pharmaceuticals and Sarepta Therapeutics 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 Sarepta Therapeutics are associated (or correlated) with Alnylam Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alnylam Pharmaceuticals has no effect on the direction of Sarepta Therapeutics i.e., Sarepta Therapeutics and Alnylam Pharmaceuticals go up and down completely randomly.

Pair Corralation between Sarepta Therapeutics and Alnylam Pharmaceuticals

Given the investment horizon of 90 days Sarepta Therapeutics is expected to under-perform the Alnylam Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Sarepta Therapeutics is 1.79 times less risky than Alnylam Pharmaceuticals. The stock trades about -0.21 of its potential returns per unit of risk. The Alnylam Pharmaceuticals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  26,270  in Alnylam Pharmaceuticals on June 16, 2024 and sell it today you would earn a total of  257.00  from holding Alnylam Pharmaceuticals or generate 0.98% return on investment over 90 days.

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

Sarepta Therapeutics  vs.  Alnylam Pharmaceuticals

Sarepta Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sarepta Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sarepta Therapeutics may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Alnylam Pharmaceuticals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alnylam Pharmaceuticals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Alnylam Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sarepta Therapeutics and Alnylam Pharmaceuticals

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

The idea behind Sarepta Therapeutics and Alnylam Pharmaceuticals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.