Correlation Between ESSA Pharma and Ventyx Biosciences

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

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

Diversification Opportunities for ESSA Pharma and Ventyx Biosciences

-0.09

Correlation Coefficient

ESSA Pharma  Ventyx Biosciences

Good diversification

The 3 months correlation between ESSA and Ventyx is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and Ventyx Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventyx Biosciences 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 Ventyx Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventyx Biosciences has no effect on the direction of ESSA Pharma i.e., ESSA Pharma and Ventyx Biosciences go up and down completely randomly.

Pair Corralation between ESSA Pharma and Ventyx Biosciences

Given the investment horizon of 90 days ESSA Pharma is expected to under-perform the Ventyx Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, ESSA Pharma is 5.77 times less risky than Ventyx Biosciences. The stock trades about -0.42 of its potential returns per unit of risk. The Ventyx Biosciences is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  268.00  in Ventyx Biosciences on September 29, 2024 and sell it today you would lose (30.00) from holding Ventyx Biosciences or give up 11.19% of portfolio value over 90 days.

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

ESSA Pharma  vs.  Ventyx Biosciences

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.

Ventyx Biosciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ventyx Biosciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Ventyx Biosciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESSA Pharma and Ventyx Biosciences

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

The idea behind ESSA Pharma and Ventyx Biosciences 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.