Correlation Between Alpha Tau and Puma Biotechnology

Can any of the company-specific risk be diversified away by investing in both Alpha Tau and Puma Biotechnology 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 Alpha Tau and Puma Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alpha Tau Medical and Puma Biotechnology, you can compare the effects of market volatilities on Alpha Tau and Puma Biotechnology 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 Alpha Tau with a short position of Puma Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Tau and Puma Biotechnology.

Diversification Opportunities for Alpha Tau and Puma Biotechnology

-0.45

Correlation Coefficient

Alpha Tau  Puma Biotechnology

Very good diversification

The 3 months correlation between Alpha and Puma is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Tau Medical and Puma Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puma Biotechnology and Alpha Tau 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 Alpha Tau Medical are associated (or correlated) with Puma Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puma Biotechnology has no effect on the direction of Alpha Tau i.e., Alpha Tau and Puma Biotechnology go up and down completely randomly.

Pair Corralation between Alpha Tau and Puma Biotechnology

Assuming the 90 days horizon Alpha Tau Medical is expected to generate 3.64 times more return on investment than Puma Biotechnology. However, Alpha Tau is 3.64 times more volatile than Puma Biotechnology. It trades about 0.09 of its potential returns per unit of risk. Puma Biotechnology is currently generating about 0.03 per unit of risk. If you would invest  22.00  in Alpha Tau Medical on December 27, 2024 and sell it today you would earn a total of  0.00  from holding Alpha Tau Medical or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

Alpha Tau Medical  vs.  Puma Biotechnology

Alpha Tau Medical

Risk-Adjusted Performance

OK

Over the last 90 days Alpha Tau Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Alpha Tau showed solid returns over the last few months and may actually be approaching a breakup point.

Puma Biotechnology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Biotechnology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Puma Biotechnology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alpha Tau and Puma Biotechnology

The main advantage of trading using opposite Alpha Tau and Puma Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Tau position performs unexpectedly, Puma Biotechnology 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 Puma Biotechnology will offset losses from the drop in Puma Biotechnology's long position.

The idea behind Alpha Tau Medical and Puma Biotechnology 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.