Correlation Between ESSA Pharma and DBV Technologies

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

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

Diversification Opportunities for ESSA Pharma and DBV Technologies

0.45

Correlation Coefficient

ESSA Pharma  DBV Technologies

Very weak diversification

The 3 months correlation between ESSA and DBV is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and DBV Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBV Technologies and ESSA 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 ESSA Pharma are associated (or correlated) with DBV Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBV Technologies has no effect on the direction of ESSA Pharma i.e., ESSA Pharma and DBV Technologies go up and down completely randomly.

Pair Corralation between ESSA Pharma and DBV Technologies

Given the investment horizon of 90 days ESSA Pharma is expected to under-perform the DBV Technologies. In addition to that, ESSA Pharma is 1.57 times more volatile than DBV Technologies. It trades about -0.08 of its total potential returns per unit of risk. DBV Technologies is currently generating about 0.04 per unit of volatility. If you would invest  403.00  in DBV Technologies on September 5, 2024 and sell it today you would earn a total of  22.00  from holding DBV Technologies or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

ESSA Pharma  vs.  DBV Technologies

ESSA Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSA Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain fairly 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.

DBV Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DBV Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DBV Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESSA Pharma and DBV Technologies

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

The idea behind ESSA Pharma and DBV Technologies 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.