Correlation Between Tempest Therapeutics and UroGen Pharma

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

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

Diversification Opportunities for Tempest Therapeutics and UroGen Pharma

0.68

Correlation Coefficient

Tempest Therapeutics  UroGen Pharma

Poor diversification

The 3 months correlation between Tempest and UroGen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tempest Therapeutics and UroGen Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UroGen Pharma and Tempest 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 Tempest Therapeutics are associated (or correlated) with UroGen Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UroGen Pharma has no effect on the direction of Tempest Therapeutics i.e., Tempest Therapeutics and UroGen Pharma go up and down completely randomly.

Pair Corralation between Tempest Therapeutics and UroGen Pharma

Given the investment horizon of 90 days Tempest Therapeutics is expected to under-perform the UroGen Pharma. In addition to that, Tempest Therapeutics is 1.67 times more volatile than UroGen Pharma. It trades about -0.14 of its total potential returns per unit of risk. UroGen Pharma is currently generating about -0.07 per unit of volatility. If you would invest  1,320  in UroGen Pharma on September 16, 2024 and sell it today you would lose (185.00) from holding UroGen Pharma or give up 14.02% of portfolio value over 90 days.

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

Tempest Therapeutics  vs.  UroGen Pharma

Tempest Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

UroGen Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UroGen Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental 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 Tempest Therapeutics and UroGen Pharma

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

The idea behind Tempest Therapeutics and UroGen Pharma 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.