Correlation Between CSL and Vertex Pharmaceuticals

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

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

Diversification Opportunities for CSL and Vertex Pharmaceuticals

0.23

Correlation Coefficient

CSL  Vertex Pharmaceuticals

Modest diversification

The 3 months correlation between CSL and Vertex is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CSL LTD SPONADR and Vertex Pharmaceuticals Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals and CSL 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 CSL LTD SPONADR are associated (or correlated) with Vertex Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceuticals has no effect on the direction of CSL i.e., CSL and Vertex Pharmaceuticals go up and down completely randomly.

Pair Corralation between CSL and Vertex Pharmaceuticals

Assuming the 90 days trading horizon CSL LTD SPONADR is expected to generate 0.71 times more return on investment than Vertex Pharmaceuticals. However, CSL LTD SPONADR is 1.41 times less risky than Vertex Pharmaceuticals. It trades about 0.09 of its potential returns per unit of risk. Vertex Pharmaceuticals Incorporated is currently generating about -0.03 per unit of risk. If you would invest  6,500  in CSL LTD SPONADR on April 22, 2025 and sell it today you would earn a total of  550.00  from holding CSL LTD SPONADR or generate 8.46% return on investment over 90 days.

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

CSL LTD SPONADR  vs.  Vertex Pharmaceuticals Incorpo

CSL LTD SPONADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CSL LTD SPONADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Vertex Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vertex Pharmaceuticals Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vertex Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CSL and Vertex Pharmaceuticals

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

The idea behind CSL LTD SPONADR and Vertex Pharmaceuticals Incorporated 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.