Correlation Between Emergent Biosolutions and Puma Biotechnology

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

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

Diversification Opportunities for Emergent Biosolutions and Puma Biotechnology

0.48

Correlation Coefficient

Emergent Biosolutions  Puma Biotechnology

Very weak diversification

The 3 months correlation between Emergent and Puma is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Biosolutions and Puma Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puma Biotechnology and Emergent Biosolutions 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 Emergent Biosolutions 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 Emergent Biosolutions i.e., Emergent Biosolutions and Puma Biotechnology go up and down completely randomly.

Pair Corralation between Emergent Biosolutions and Puma Biotechnology

Considering the 90-day investment horizon Emergent Biosolutions is expected to generate 1.21 times more return on investment than Puma Biotechnology. However, Emergent Biosolutions is 1.21 times more volatile than Puma Biotechnology. It trades about 0.06 of its potential returns per unit of risk. Puma Biotechnology is currently generating about 0.06 per unit of risk. If you would invest  920.00  in Emergent Biosolutions on October 7, 2024 and sell it today you would earn a total of  112.00  from holding Emergent Biosolutions or generate 12.17% return on investment over 90 days.

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

Emergent Biosolutions  vs.  Puma Biotechnology

Emergent Biosolutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Puma Biotechnology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Biotechnology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Puma Biotechnology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emergent Biosolutions and Puma Biotechnology

The main advantage of trading using opposite Emergent Biosolutions and Puma Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emergent Biosolutions 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 Emergent Biosolutions 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.