Correlation Between United Therapeutics and Blueprint Medicines

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

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

Diversification Opportunities for United Therapeutics and Blueprint Medicines

0.74

Correlation Coefficient

United Therapeutics  Blueprint Medicines

Poor diversification

The 3 months correlation between United and Blueprint is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding United Therapeutics and Blueprint Medicines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blueprint Medicines Corp and United Therapeutics 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 Therapeutics are associated (or correlated) with Blueprint Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blueprint Medicines Corp has no effect on the direction of United Therapeutics i.e., United Therapeutics and Blueprint Medicines go up and down completely randomly.

Pair Corralation between United Therapeutics and Blueprint Medicines

Given the investment horizon of 90 days United Therapeutics is expected to generate 1.03 times less return on investment than Blueprint Medicines. But when comparing it to its historical volatility, United Therapeutics is 1.5 times less risky than Blueprint Medicines. It trades about 0.05 of its potential returns per unit of risk. Blueprint Medicines Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,253  in Blueprint Medicines Corp on September 2, 2024 and sell it today you would earn a total of  385.00  from holding Blueprint Medicines Corp or generate 4.16% return on investment over 90 days.

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

United Therapeutics  vs.  Blueprint Medicines Corp

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.

Blueprint Medicines Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blueprint Medicines Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Blueprint Medicines is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United Therapeutics and Blueprint Medicines

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

The idea behind United Therapeutics and Blueprint Medicines Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .