Correlation Between Centessa Pharmaceuticals and ESH Acquisition

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

By analyzing existing cross correlation between Centessa Pharmaceuticals PLC and ESH Acquisition Corp, you can compare the effects of market volatilities on Centessa Pharmaceuticals and ESH Acquisition 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 Centessa Pharmaceuticals with a short position of ESH Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centessa Pharmaceuticals and ESH Acquisition.

Diversification Opportunities for Centessa Pharmaceuticals and ESH Acquisition

0.48

Correlation Coefficient

Centessa Pharmaceuticals  ESH Acquisition

Very weak diversification

The 3 months correlation between Centessa and ESH is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition Corp and Centessa Pharmaceuticals 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 Centessa Pharmaceuticals PLC are associated (or correlated) with ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and ESH Acquisition go up and down completely randomly.

Pair Corralation between Centessa Pharmaceuticals and ESH Acquisition

Given the investment horizon of 90 days Centessa Pharmaceuticals PLC is expected to generate 21.52 times more return on investment than ESH Acquisition. However, Centessa Pharmaceuticals is 21.52 times more volatile than ESH Acquisition Corp. It trades about 0.1 of its potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.09 per unit of risk. If you would invest  328.00  in Centessa Pharmaceuticals PLC on September 14, 2024 and sell it today you would earn a total of  1,359  from holding Centessa Pharmaceuticals PLC or generate 414.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.52%
Values	Daily Returns

Centessa Pharmaceuticals PLC  vs.  ESH Acquisition Corp

Centessa Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Centessa Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ESH Acquisition Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Centessa Pharmaceuticals and ESH Acquisition

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

The idea behind Centessa Pharmaceuticals PLC and ESH Acquisition Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.