Correlation Between Viatris and Olema Pharmaceuticals

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

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

Diversification Opportunities for Viatris and Olema Pharmaceuticals

0.8

Correlation Coefficient

Viatris  Olema Pharmaceuticals

Very poor diversification

The 3 months correlation between Viatris and Olema is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Viatris and Olema Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olema Pharmaceuticals and Viatris 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 Viatris are associated (or correlated) with Olema Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olema Pharmaceuticals has no effect on the direction of Viatris i.e., Viatris and Olema Pharmaceuticals go up and down completely randomly.

Pair Corralation between Viatris and Olema Pharmaceuticals

Given the investment horizon of 90 days Viatris is expected to under-perform the Olema Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Viatris is 1.83 times less risky than Olema Pharmaceuticals. The stock trades about -0.22 of its potential returns per unit of risk. The Olema Pharmaceuticals is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  561.00  in Olema Pharmaceuticals on December 28, 2024 and sell it today you would lose (150.00) from holding Olema Pharmaceuticals or give up 26.74% of portfolio value over 90 days.

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

Viatris  vs.  Olema Pharmaceuticals

Viatris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Viatris has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Olema Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Olema Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Viatris and Olema Pharmaceuticals

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

The idea behind Viatris and Olema Pharmaceuticals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.