Correlation Between Puma Biotechnology and Mirum Pharmaceuticals

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

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

Diversification Opportunities for Puma Biotechnology and Mirum Pharmaceuticals

-0.35

Correlation Coefficient

Puma Biotechnology  Mirum Pharmaceuticals

Very good diversification

The 3 months correlation between Puma and Mirum is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Puma Biotechnology and Mirum Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirum Pharmaceuticals and Puma Biotechnology 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 Puma Biotechnology are associated (or correlated) with Mirum Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirum Pharmaceuticals has no effect on the direction of Puma Biotechnology i.e., Puma Biotechnology and Mirum Pharmaceuticals go up and down completely randomly.

Pair Corralation between Puma Biotechnology and Mirum Pharmaceuticals

Given the investment horizon of 90 days Puma Biotechnology is expected to generate 1.93 times more return on investment than Mirum Pharmaceuticals. However, Puma Biotechnology is 1.93 times more volatile than Mirum Pharmaceuticals. It trades about 0.2 of its potential returns per unit of risk. Mirum Pharmaceuticals is currently generating about -0.09 per unit of risk. If you would invest  279.00  in Puma Biotechnology on December 4, 2024 and sell it today you would earn a total of  56.00  from holding Puma Biotechnology or generate 20.07% return on investment over 90 days.

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

Puma Biotechnology  vs.  Mirum Pharmaceuticals

Puma Biotechnology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Biotechnology are ranked lower than 3 (%) 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.

Mirum Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mirum Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Mirum Pharmaceuticals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Puma Biotechnology and Mirum Pharmaceuticals

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

The idea behind Puma Biotechnology and Mirum Pharmaceuticals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.