Correlation Between United Therapeutics and Lyra Therapeutics

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

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

Diversification Opportunities for United Therapeutics and Lyra Therapeutics

-0.17

Correlation Coefficient

United Therapeutics  Lyra Therapeutics

Good diversification

The 3 months correlation between United and Lyra is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding United Therapeutics and Lyra Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyra Therapeutics and United 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 United Therapeutics are associated (or correlated) with Lyra Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyra Therapeutics has no effect on the direction of United Therapeutics i.e., United Therapeutics and Lyra Therapeutics go up and down completely randomly.

Pair Corralation between United Therapeutics and Lyra Therapeutics

Given the investment horizon of 90 days United Therapeutics is expected to generate 0.26 times more return on investment than Lyra Therapeutics. However, United Therapeutics is 3.87 times less risky than Lyra Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Lyra Therapeutics is currently generating about -0.05 per unit of risk. If you would invest  35,240  in United Therapeutics on September 2, 2024 and sell it today you would earn a total of  1,809  from holding United Therapeutics or generate 5.13% return on investment over 90 days.

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

United Therapeutics  vs.  Lyra Therapeutics

United Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Therapeutics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, United Therapeutics is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Lyra Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyra Therapeutics 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with United Therapeutics and Lyra Therapeutics

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

The idea behind United Therapeutics and Lyra Therapeutics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.