Correlation Between Viatris and Puma Biotechnology

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

By analyzing existing cross correlation between Viatris and Puma Biotechnology, you can compare the effects of market volatilities on Viatris and Puma Biotechnology 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 Puma Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viatris and Puma Biotechnology.

Diversification Opportunities for Viatris and Puma Biotechnology

0.72

Correlation Coefficient

Viatris  Puma Biotechnology

Poor diversification

The 3 months correlation between Viatris and Puma is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Viatris and Puma Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puma Biotechnology 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 Puma Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puma Biotechnology has no effect on the direction of Viatris i.e., Viatris and Puma Biotechnology go up and down completely randomly.

Pair Corralation between Viatris and Puma Biotechnology

Given the investment horizon of 90 days Viatris is expected to generate 2.79 times less return on investment than Puma Biotechnology. But when comparing it to its historical volatility, Viatris is 2.76 times less risky than Puma Biotechnology. It trades about 0.07 of its potential returns per unit of risk. Puma Biotechnology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  395.00  in Puma Biotechnology on February 15, 2024 and sell it today you would earn a total of  99.00  from holding Puma Biotechnology or generate 25.06% return on investment over 90 days.

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

Viatris  vs.  Puma Biotechnology

Viatris

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Puma Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Puma Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Viatris and Puma Biotechnology

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

The idea behind Viatris and Puma Biotechnology 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.