Correlation Between Puma Biotechnology and Travere Therapeutics

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

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

Diversification Opportunities for Puma Biotechnology and Travere Therapeutics

0.84

Correlation Coefficient

Puma Biotechnology  Travere Therapeutics

Very poor diversification

The 3 months correlation between Puma and Travere is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Puma Biotechnology and Travere Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travere Therapeutics 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 Travere Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travere Therapeutics has no effect on the direction of Puma Biotechnology i.e., Puma Biotechnology and Travere Therapeutics go up and down completely randomly.

Pair Corralation between Puma Biotechnology and Travere Therapeutics

Given the investment horizon of 90 days Puma Biotechnology is expected to generate 1.51 times less return on investment than Travere Therapeutics. In addition to that, Puma Biotechnology is 1.18 times more volatile than Travere Therapeutics. It trades about 0.06 of its total potential returns per unit of risk. Travere Therapeutics is currently generating about 0.1 per unit of volatility. If you would invest  1,440  in Travere Therapeutics on September 17, 2024 and sell it today you would earn a total of  331.50  from holding Travere Therapeutics or generate 23.02% return on investment over 90 days.

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

Puma Biotechnology  vs.  Travere Therapeutics

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.

Travere Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Travere Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Travere Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Puma Biotechnology and Travere Therapeutics

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

The idea behind Puma Biotechnology and Travere 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.