Correlation Between Universe Pharmaceuticals and Jazz Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Universe Pharmaceuticals and Jazz 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 Universe Pharmaceuticals and Jazz Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universe Pharmaceuticals and Jazz Pharmaceuticals PLC, you can compare the effects of market volatilities on Universe Pharmaceuticals and Jazz 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 Universe Pharmaceuticals with a short position of Jazz Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universe Pharmaceuticals and Jazz Pharmaceuticals.
Diversification Opportunities for Universe Pharmaceuticals and Jazz Pharmaceuticals
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universe and Jazz is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Universe Pharmaceuticals and Jazz Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals PLC and Universe 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 Universe Pharmaceuticals are associated (or correlated) with Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals PLC has no effect on the direction of Universe Pharmaceuticals i.e., Universe Pharmaceuticals and Jazz Pharmaceuticals go up and down completely randomly.
Pair Corralation between Universe Pharmaceuticals and Jazz Pharmaceuticals
Considering the 90-day investment horizon Universe Pharmaceuticals is expected to generate 15.73 times more return on investment than Jazz Pharmaceuticals. However, Universe Pharmaceuticals is 15.73 times more volatile than Jazz Pharmaceuticals PLC. It trades about 0.03 of its potential returns per unit of risk. Jazz Pharmaceuticals PLC is currently generating about -0.02 per unit of risk. If you would invest 1,224 in Universe Pharmaceuticals on October 15, 2024 and sell it today you would lose (1,161) from holding Universe Pharmaceuticals or give up 94.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universe Pharmaceuticals vs. Jazz Pharmaceuticals PLC
Performance |
| Timeline |
| Universe Pharmaceuticals |
| Jazz Pharmaceuticals PLC |
Universe Pharmaceuticals and Jazz Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universe Pharmaceuticals and Jazz Pharmaceuticals
The main advantage of trading using opposite Universe Pharmaceuticals and Jazz Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universe Pharmaceuticals position performs unexpectedly, Jazz 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 Jazz Pharmaceuticals will offset losses from the drop in Jazz Pharmaceuticals' long position.The idea behind Universe Pharmaceuticals and Jazz Pharmaceuticals PLC 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.
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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