Correlation Between Biomarin Pharmaceutical and United Therapeutics
Can any of the company-specific risk be diversified away by investing in both Biomarin Pharmaceutical and United Therapeutics 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 Biomarin Pharmaceutical and United Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biomarin Pharmaceutical and United Therapeutics, you can compare the effects of market volatilities on Biomarin Pharmaceutical and United Therapeutics 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 Biomarin Pharmaceutical with a short position of United Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biomarin Pharmaceutical and United Therapeutics.
Diversification Opportunities for Biomarin Pharmaceutical and United Therapeutics
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Biomarin and United is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Biomarin Pharmaceutical and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics and Biomarin Pharmaceutical 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 Biomarin Pharmaceutical are associated (or correlated) with United Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Therapeutics has no effect on the direction of Biomarin Pharmaceutical i.e., Biomarin Pharmaceutical and United Therapeutics go up and down completely randomly.
Pair Corralation between Biomarin Pharmaceutical and United Therapeutics
Given the investment horizon of 90 days Biomarin Pharmaceutical is expected to generate 0.85 times more return on investment than United Therapeutics. However, Biomarin Pharmaceutical is 1.17 times less risky than United Therapeutics. It trades about -0.04 of its potential returns per unit of risk. United Therapeutics is currently generating about -0.04 per unit of risk. If you would invest 6,660 in Biomarin Pharmaceutical on November 1, 2024 and sell it today you would lose (272.00) from holding Biomarin Pharmaceutical or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biomarin Pharmaceutical vs. United Therapeutics
Performance |
| Timeline |
| Biomarin Pharmaceutical |
| United Therapeutics |
Biomarin Pharmaceutical and United Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biomarin Pharmaceutical and United Therapeutics
The main advantage of trading using opposite Biomarin Pharmaceutical and United Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biomarin Pharmaceutical position performs unexpectedly, United Therapeutics 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 United Therapeutics will offset losses from the drop in United Therapeutics' long position.| Biomarin Pharmaceutical vs. Alnylam Pharmaceuticals | Biomarin Pharmaceutical vs. Exelixis | Biomarin Pharmaceutical vs. Halozyme Therapeutics | Biomarin Pharmaceutical vs. Arrowhead Pharmaceuticals |
| United Therapeutics vs. Incyte | United Therapeutics vs. Alnylam Pharmaceuticals | United Therapeutics vs. Ultragenyx | United Therapeutics vs. Apellis Pharmaceuticals |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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