Do you worry about stock market volatility? One idea is to consider a stock's recent correlation to volatility. We ran a screen with this idea in mind.
We began by screening the biotech industry for those stocks with current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover their short-term liabilities.
We then screened for those with strong positive correlations to the volatility (VIX) index over the last two months. This indicates that these stocks have tended to outperform when market uncertainty and volatility spiked. This may bode well if the market sees more volatility in the future. Of course, past performance is no guarantee of future returns.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
(click image to enlarge)
Tool provided by Kapitall (kapitall.com).
Do you think these stocks would weather a stock market storm? Use this list as a starting point for your own analysis.
List sorted by correlation to VIX.
1. Protalix BioTherapeutics, Inc. (PLX): Focuses on the development and commercialization of recombinant therapeutic proteins based on its proprietary ProCellEx protein expression system in the United States. Market cap at $486.26M, most recent closing price at $5.29. Current ratio at 3.09. Correlation with the VIX index at 0.657 over the last 60 days.
2. Vertex Pharmaceuticals Incorporated (VRTX): Engages in the discovery, development, and commercialization of small molecule drugs for the treatment of serious diseases worldwide. Market cap at $11.8B, most recent closing price at $54.67. Current ratio at 4.2. Correlation with the VIX index at 0.601 over the last 60 days.
3. Agenus Inc. (AGEN): Develops and commercializes immunotherapies for cancer and infectious diseases. Market cap at $104.19M, most recent closing price at $4.58. Current ratio at 5.77. Correlation with the VIX index at 0.568 over the last 60 days.
4. Oncolytics Biotech Inc. (ONCY): Focuses on the development of oncolytic viruses as potential cancer therapeutics. Market cap at $233.66M, most recent closing price at $3.05. Current ratio at 7.74. Correlation with the VIX index at 0.541 over the last 60 days.
5. Dendreon Corp. (DNDN): Engages in the discovery, development, and commercialization of therapeutics to enhance cancer treatment options for patients. Market cap at $784.15M, most recent closing price at $5.08. Current ratio at 6.06. Correlation with the VIX index at 0.526 over the last 60 days.
*Price data sourced from Yahoo Finance, all other data sourced from Finviz.