Correlation Between Erasca and ESSA Pharma

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

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

Diversification Opportunities for Erasca and ESSA Pharma

-0.39

Correlation Coefficient

Erasca  ESSA Pharma

Very good diversification

The 3 months correlation between Erasca and ESSA is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Erasca Inc and ESSA Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Pharma and Erasca 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 Erasca Inc are associated (or correlated) with ESSA Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSA Pharma has no effect on the direction of Erasca i.e., Erasca and ESSA Pharma go up and down completely randomly.

Pair Corralation between Erasca and ESSA Pharma

Given the investment horizon of 90 days Erasca Inc is expected to generate 0.36 times more return on investment than ESSA Pharma. However, Erasca Inc is 2.78 times less risky than ESSA Pharma. It trades about 0.01 of its potential returns per unit of risk. ESSA Pharma is currently generating about -0.12 per unit of risk. If you would invest  258.00  in Erasca Inc on September 23, 2024 and sell it today you would lose (4.00) from holding Erasca Inc or give up 1.55% of portfolio value over 90 days.

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

Erasca Inc  vs.  ESSA Pharma

Erasca Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erasca Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Erasca is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 unsteady 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.

Pair Trading with Erasca and ESSA Pharma

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

The idea behind Erasca Inc and ESSA Pharma 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.