Correlation Between Wave Life and Vaxcyte

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

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

Diversification Opportunities for Wave Life and Vaxcyte

0.47

Correlation Coefficient

Wave Life  Vaxcyte

Very weak diversification

The 3 months correlation between Wave and Vaxcyte is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Wave Life Sciences and Vaxcyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaxcyte and Wave Life 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 Wave Life Sciences are associated (or correlated) with Vaxcyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaxcyte has no effect on the direction of Wave Life i.e., Wave Life and Vaxcyte go up and down completely randomly.

Pair Corralation between Wave Life and Vaxcyte

Considering the 90-day investment horizon Wave Life Sciences is expected to generate 10.1 times more return on investment than Vaxcyte. However, Wave Life is 10.1 times more volatile than Vaxcyte. It trades about 0.22 of its potential returns per unit of risk. Vaxcyte is currently generating about -0.03 per unit of risk. If you would invest  820.00  in Wave Life Sciences on July 30, 2024 and sell it today you would earn a total of  625.00  from holding Wave Life Sciences or generate 76.22% return on investment over 90 days.

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

Wave Life Sciences  vs.  Vaxcyte

Wave Life Sciences

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wave Life Sciences are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Wave Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vaxcyte

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vaxcyte are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vaxcyte showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wave Life and Vaxcyte

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

The idea behind Wave Life Sciences and Vaxcyte 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.