Correlation Between United Parcel and United Therapeutics

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

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

Diversification Opportunities for United Parcel and United Therapeutics

0.0

Correlation Coefficient

United Parcel  United Therapeutics

Pay attention - limited upside

The 3 months correlation between United and United is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and United Therapeutics go up and down completely randomly.

Pair Corralation between United Parcel and United Therapeutics

If you would invest (100.00) in United Therapeutics on December 22, 2024 and sell it today you would earn a total of  100.00  from holding United Therapeutics or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

United Parcel Service  vs.  United Therapeutics

United Parcel Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

United Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Parcel and United Therapeutics

The main advantage of trading using opposite United Parcel and United Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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 United Parcel Service 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.