Correlation Between United Therapeutics and Biomarin Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both United Therapeutics and Biomarin Pharmaceutical 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 United Therapeutics and Biomarin Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Therapeutics and Biomarin Pharmaceutical, you can compare the effects of market volatilities on United Therapeutics and Biomarin Pharmaceutical 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 United Therapeutics with a short position of Biomarin Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Therapeutics and Biomarin Pharmaceutical.
Diversification Opportunities for United Therapeutics and Biomarin Pharmaceutical
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and Biomarin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding United Therapeutics and Biomarin Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomarin Pharmaceutical and United Therapeutics 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 United Therapeutics are associated (or correlated) with Biomarin Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomarin Pharmaceutical has no effect on the direction of United Therapeutics i.e., United Therapeutics and Biomarin Pharmaceutical go up and down completely randomly.
Pair Corralation between United Therapeutics and Biomarin Pharmaceutical
Given the investment horizon of 90 days United Therapeutics is expected to generate 0.91 times more return on investment than Biomarin Pharmaceutical. However, United Therapeutics is 1.1 times less risky than Biomarin Pharmaceutical. It trades about 0.11 of its potential returns per unit of risk. Biomarin Pharmaceutical is currently generating about -0.06 per unit of risk. If you would invest 21,872 in United Therapeutics on November 9, 2024 and sell it today you would earn a total of 13,503 from holding United Therapeutics or generate 61.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Therapeutics vs. Biomarin Pharmaceutical
Performance |
| Timeline |
| United Therapeutics |
| Biomarin Pharmaceutical |
United Therapeutics and Biomarin Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Therapeutics and Biomarin Pharmaceutical
The main advantage of trading using opposite United Therapeutics and Biomarin Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Therapeutics position performs unexpectedly, Biomarin Pharmaceutical 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 Biomarin Pharmaceutical will offset losses from the drop in Biomarin Pharmaceutical's long position.| United Therapeutics vs. Incyte | United Therapeutics vs. Alnylam Pharmaceuticals | United Therapeutics vs. Ultragenyx | United Therapeutics vs. Apellis Pharmaceuticals |
| Biomarin Pharmaceutical vs. Alnylam Pharmaceuticals | Biomarin Pharmaceutical vs. Exelixis | Biomarin Pharmaceutical vs. Halozyme Therapeutics | Biomarin Pharmaceutical vs. Arrowhead 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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