Do you worry about stock market volatility? When making investment decisions it can be wise 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.
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. Given Imaging Ltd. (GIVN): Engages in the development, manufacture, and marketing of diagnostic products for the visualization and detection of gastrointestinal tract disorders. Market cap at $558.85M, most recent closing price at $18.18. Correlation with the VIX index at 0.643 over the last 60 days. Current ratio at 4.08.
2. Aegerion Pharmaceuticals, Inc. (AEGR): Engages in the development and commercialization of novel therapeutics to treat severe lipid disorders. Market cap at $515M, most recent closing price at $20.22. Correlation with the VIX index at 0.594 over the last 60 days. Current ratio at 12.34.
*Price data sourced from Yahoo Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.