Correlation Between Jazz Pharmaceuticals and United Therapeutics
Can any of the company-specific risk be diversified away by investing in both Jazz Pharmaceuticals 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 Jazz Pharmaceuticals and United Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jazz Pharmaceuticals PLC and United Therapeutics, you can compare the effects of market volatilities on Jazz Pharmaceuticals 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 Jazz Pharmaceuticals with a short position of United Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jazz Pharmaceuticals and United Therapeutics.
Diversification Opportunities for Jazz Pharmaceuticals and United Therapeutics
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Jazz and United is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Jazz Pharmaceuticals PLC and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics and Jazz Pharmaceuticals 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 Jazz Pharmaceuticals PLC 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 Jazz Pharmaceuticals i.e., Jazz Pharmaceuticals and United Therapeutics go up and down completely randomly.
Pair Corralation between Jazz Pharmaceuticals and United Therapeutics
Given the investment horizon of 90 days Jazz Pharmaceuticals PLC is expected to generate 0.66 times more return on investment than United Therapeutics. However, Jazz Pharmaceuticals PLC is 1.51 times less risky than United Therapeutics. It trades about -0.09 of its potential returns per unit of risk. United Therapeutics is currently generating about -0.07 per unit of risk. If you would invest 12,254 in Jazz Pharmaceuticals PLC on November 8, 2024 and sell it today you would lose (247.00) from holding Jazz Pharmaceuticals PLC or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jazz Pharmaceuticals PLC vs. United Therapeutics
Performance |
| Timeline |
| Jazz Pharmaceuticals PLC |
| United Therapeutics |
Jazz Pharmaceuticals and United Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jazz Pharmaceuticals and United Therapeutics
The main advantage of trading using opposite Jazz Pharmaceuticals and United Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jazz Pharmaceuticals 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.| Jazz Pharmaceuticals vs. Incyte | Jazz Pharmaceuticals vs. Alnylam Pharmaceuticals | Jazz Pharmaceuticals vs. United Therapeutics | Jazz Pharmaceuticals vs. Ultragenyx |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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