Correlation Between United Therapeutics and Halozyme Therapeutics

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

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

Diversification Opportunities for United Therapeutics and Halozyme Therapeutics

0.48

Correlation Coefficient

United Therapeutics  Halozyme Therapeutics

Very weak diversification

The 3 months correlation between United and Halozyme is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding United Therapeutics and Halozyme Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halozyme Therapeutics 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 Halozyme Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halozyme Therapeutics has no effect on the direction of United Therapeutics i.e., United Therapeutics and Halozyme Therapeutics go up and down completely randomly.

Pair Corralation between United Therapeutics and Halozyme Therapeutics

Given the investment horizon of 90 days United Therapeutics is expected to under-perform the Halozyme Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, United Therapeutics is 1.03 times less risky than Halozyme Therapeutics. The stock trades about -0.08 of its potential returns per unit of risk. The Halozyme Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,906  in Halozyme Therapeutics on October 8, 2024 and sell it today you would earn a total of  145.00  from holding Halozyme Therapeutics or generate 2.96% return on investment over 90 days.

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

United Therapeutics  vs.  Halozyme Therapeutics

United Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Halozyme Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halozyme Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with United Therapeutics and Halozyme Therapeutics

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

The idea behind United Therapeutics and Halozyme 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.