Correlation Between Opthea and Puma Biotechnology

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

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

Diversification Opportunities for Opthea and Puma Biotechnology

-0.12

Correlation Coefficient

Opthea  Puma Biotechnology

Good diversification

The 3 months correlation between Opthea and Puma is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Opthea and Puma Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puma Biotechnology and Opthea 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 Opthea 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 Opthea i.e., Opthea and Puma Biotechnology go up and down completely randomly.

Pair Corralation between Opthea and Puma Biotechnology

Considering the 90-day investment horizon Opthea is expected to generate 0.8 times more return on investment than Puma Biotechnology. However, Opthea is 1.25 times less risky than Puma Biotechnology. It trades about 0.13 of its potential returns per unit of risk. Puma Biotechnology is currently generating about 0.01 per unit of risk. If you would invest  189.00  in Opthea on September 15, 2024 and sell it today you would earn a total of  136.00  from holding Opthea or generate 71.96% return on investment over 90 days.

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

Opthea  vs.  Puma Biotechnology

Opthea

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Opthea is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Puma Biotechnology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Biotechnology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Puma Biotechnology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opthea and Puma Biotechnology

The main advantage of trading using opposite Opthea and Puma Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Opthea 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 Opthea 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.