Correlation Between Seagen and United Therapeutics

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

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

Diversification Opportunities for Seagen and United Therapeutics

-0.54

Correlation Coefficient

Seagen  United Therapeutics

Excellent diversification

The 3 months correlation between Seagen and United is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Seagen Inc and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics and Seagen 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 Seagen Inc 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 Seagen i.e., Seagen and United Therapeutics go up and down completely randomly.

Pair Corralation between Seagen and United Therapeutics

If you would invest  36,140  in United Therapeutics on August 31, 2024 and sell it today you would earn a total of  1,673  from holding United Therapeutics or generate 4.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Seagen Inc  vs.  United Therapeutics

Seagen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seagen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Seagen is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

United Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, United Therapeutics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Seagen and United Therapeutics

The main advantage of trading using opposite Seagen and United Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seagen 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 Seagen Inc 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.