Correlation Between Puma Biotechnology and Novavax

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

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

Diversification Opportunities for Puma Biotechnology and Novavax

0.4

Correlation Coefficient

Puma Biotechnology  Novavax

Very weak diversification

The 3 months correlation between Puma and Novavax is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Puma Biotechnology and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax 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 Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Puma Biotechnology i.e., Puma Biotechnology and Novavax go up and down completely randomly.

Pair Corralation between Puma Biotechnology and Novavax

Given the investment horizon of 90 days Puma Biotechnology is expected to generate 1.04 times more return on investment than Novavax. However, Puma Biotechnology is 1.04 times more volatile than Novavax. It trades about 0.2 of its potential returns per unit of risk. Novavax is currently generating about -0.07 per unit of risk. If you would invest  279.00  in Puma Biotechnology on December 5, 2024 and sell it today you would earn a total of  60.00  from holding Puma Biotechnology or generate 21.51% return on investment over 90 days.

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

Puma Biotechnology  vs.  Novavax

Puma Biotechnology

Risk-Adjusted Performance

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.

Novavax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novavax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Novavax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Puma Biotechnology and Novavax

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

The idea behind Puma Biotechnology and Novavax 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.