Correlation Between Wave Life and United Therapeutics
Can any of the company-specific risk be diversified away by investing in both Wave Life 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 Wave Life and United Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wave Life Sciences and United Therapeutics, you can compare the effects of market volatilities on Wave Life 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 Wave Life with a short position of United Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wave Life and United Therapeutics.
Diversification Opportunities for Wave Life and United Therapeutics
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wave and United is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Wave Life Sciences and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics and Wave Life 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 Wave Life Sciences 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 Wave Life i.e., Wave Life and United Therapeutics go up and down completely randomly.
Pair Corralation between Wave Life and United Therapeutics
Considering the 90-day investment horizon Wave Life Sciences is expected to generate 7.21 times more return on investment than United Therapeutics. However, Wave Life is 7.21 times more volatile than United Therapeutics. It trades about 0.17 of its potential returns per unit of risk. United Therapeutics is currently generating about 0.03 per unit of risk. If you would invest 559.00 in Wave Life Sciences on August 28, 2024 and sell it today you would earn a total of 930.00 from holding Wave Life Sciences or generate 166.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wave Life Sciences vs. United Therapeutics
Performance |
| Timeline |
| Wave Life Sciences |
| United Therapeutics |
Wave Life and United Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wave Life and United Therapeutics
The main advantage of trading using opposite Wave Life and United Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wave Life 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.| Wave Life vs. Capricor Therapeutics | Wave Life vs. Soleno Therapeutics | Wave Life vs. Bio Path Holdings | Wave Life vs. Moleculin Biotech |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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