Correlation Between UroGen Pharma and Lumos Pharma

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

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

Diversification Opportunities for UroGen Pharma and Lumos Pharma

-0.53

Correlation Coefficient

UroGen Pharma  Lumos Pharma

Excellent diversification

The 3 months correlation between UroGen and Lumos is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding UroGen Pharma and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma and UroGen Pharma 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 UroGen Pharma are associated (or correlated) with Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of UroGen Pharma i.e., UroGen Pharma and Lumos Pharma go up and down completely randomly.

Pair Corralation between UroGen Pharma and Lumos Pharma

Given the investment horizon of 90 days UroGen Pharma is expected to generate 4.0 times more return on investment than Lumos Pharma. However, UroGen Pharma is 4.0 times more volatile than Lumos Pharma. It trades about 0.04 of its potential returns per unit of risk. Lumos Pharma is currently generating about 0.02 per unit of risk. If you would invest  1,119  in UroGen Pharma on September 16, 2024 and sell it today you would earn a total of  16.00  from holding UroGen Pharma or generate 1.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

UroGen Pharma  vs.  Lumos Pharma

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.

Lumos Pharma

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lumos Pharma are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Lumos Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UroGen Pharma and Lumos Pharma

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

The idea behind UroGen Pharma and Lumos 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.