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

-0.11

Correlation Coefficient

Biomarin Pharmaceutical  United Therapeutics

Good diversification

The 3 months correlation between Biomarin and United is -0.11. 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 0.82 times more return on investment than United Therapeutics. However, Biomarin Pharmaceutical is 1.21 times less risky than United Therapeutics. It trades about 0.05 of its potential returns per unit of risk. United Therapeutics is currently generating about -0.1 per unit of risk. If you would invest  6,603  in Biomarin Pharmaceutical on November 29, 2024 and sell it today you would earn a total of  278.00  from holding Biomarin Pharmaceutical or generate 4.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Biomarin Pharmaceutical  vs.  United Therapeutics

Biomarin Pharmaceutical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Biomarin Pharmaceutical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Biomarin Pharmaceutical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

United Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

The idea behind Biomarin Pharmaceutical and United Therapeutics 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.