Correlation Between Ultragenyx and United Therapeutics

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

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

Diversification Opportunities for Ultragenyx and United Therapeutics

-0.55

Correlation Coefficient

Ultragenyx  United Therapeutics

Excellent diversification

The 3 months correlation between Ultragenyx and United is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ultragenyx and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics and Ultragenyx 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 Ultragenyx are associated (or correlated) with United Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Therapeutics has no effect on the direction of Ultragenyx i.e., Ultragenyx and United Therapeutics go up and down completely randomly.

Pair Corralation between Ultragenyx and United Therapeutics

Given the investment horizon of 90 days Ultragenyx is expected to under-perform the United Therapeutics. In addition to that, Ultragenyx is 1.14 times more volatile than United Therapeutics. It trades about -0.12 of its total potential returns per unit of risk. United Therapeutics is currently generating about 0.05 per unit of volatility. If you would invest  35,240  in United Therapeutics on September 2, 2024 and sell it today you would earn a total of  1,809  from holding United Therapeutics or generate 5.13% return on investment over 90 days.

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

Ultragenyx  vs.  United Therapeutics

Ultragenyx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultragenyx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

United Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Therapeutics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, United Therapeutics is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ultragenyx and United Therapeutics

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

The idea behind Ultragenyx and United 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..