Correlation Between ESSA Pharma and Eyepoint Pharmaceuticals

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

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

Diversification Opportunities for ESSA Pharma and Eyepoint Pharmaceuticals

0.11

Correlation Coefficient

ESSA Pharma  Eyepoint Pharmaceuticals

Average diversification

The 3 months correlation between ESSA and Eyepoint is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and Eyepoint Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyepoint Pharmaceuticals 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 Eyepoint Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyepoint Pharmaceuticals has no effect on the direction of ESSA Pharma i.e., ESSA Pharma and Eyepoint Pharmaceuticals go up and down completely randomly.

Pair Corralation between ESSA Pharma and Eyepoint Pharmaceuticals

Given the investment horizon of 90 days ESSA Pharma is expected to generate 4.47 times less return on investment than Eyepoint Pharmaceuticals. But when comparing it to its historical volatility, ESSA Pharma is 1.78 times less risky than Eyepoint Pharmaceuticals. It trades about 0.02 of its potential returns per unit of risk. Eyepoint Pharmaceuticals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  327.00  in Eyepoint Pharmaceuticals on September 28, 2024 and sell it today you would earn a total of  431.00  from holding Eyepoint Pharmaceuticals or generate 131.8% return on investment over 90 days.

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

ESSA Pharma  vs.  Eyepoint Pharmaceuticals

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 unfluctuating 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.

Eyepoint Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eyepoint Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eyepoint Pharmaceuticals is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ESSA Pharma and Eyepoint Pharmaceuticals

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

The idea behind ESSA Pharma and Eyepoint Pharmaceuticals 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.