Correlation Between Procaps Group and Puma Biotechnology

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

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

Diversification Opportunities for Procaps Group and Puma Biotechnology

-0.28

Correlation Coefficient

Procaps Group  Puma Biotechnology

Very good diversification

The 3 months correlation between Procaps and Puma is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Procaps Group SA and Puma Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puma Biotechnology and Procaps Group 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 Procaps Group SA 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 Procaps Group i.e., Procaps Group and Puma Biotechnology go up and down completely randomly.

Pair Corralation between Procaps Group and Puma Biotechnology

Given the investment horizon of 90 days Procaps Group SA is expected to generate 6.7 times more return on investment than Puma Biotechnology. However, Procaps Group is 6.7 times more volatile than Puma Biotechnology. It trades about 0.32 of its potential returns per unit of risk. Puma Biotechnology is currently generating about 0.22 per unit of risk. If you would invest  69.00  in Procaps Group SA on September 16, 2024 and sell it today you would earn a total of  172.00  from holding Procaps Group SA or generate 249.28% return on investment over 90 days.

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

Procaps Group SA  vs.  Puma Biotechnology

Procaps Group SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procaps Group SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Procaps Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Puma Biotechnology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Biotechnology are ranked lower than 5 (%) 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 Procaps Group and Puma Biotechnology

The main advantage of trading using opposite Procaps Group and Puma Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procaps Group 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 Procaps Group SA 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.