Correlation Between Esperion Therapeutics and Silence Therapeutics

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

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

Diversification Opportunities for Esperion Therapeutics and Silence Therapeutics

-0.78

Correlation Coefficient

Esperion Therapeutics  Silence Therapeutics

Pay attention - limited upside

The 3 months correlation between Esperion and Silence is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and Silence Therapeutics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silence Therapeutics PLC and Esperion Therapeutics 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 Esperion Therapeutics are associated (or correlated) with Silence Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silence Therapeutics PLC has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and Silence Therapeutics go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Silence Therapeutics

Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 0.96 times more return on investment than Silence Therapeutics. However, Esperion Therapeutics is 1.04 times less risky than Silence Therapeutics. It trades about 0.13 of its potential returns per unit of risk. Silence Therapeutics PLC is currently generating about -0.22 per unit of risk. If you would invest  176.00  in Esperion Therapeutics on September 14, 2024 and sell it today you would earn a total of  79.00  from holding Esperion Therapeutics or generate 44.89% return on investment over 90 days.

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

Esperion Therapeutics  vs.  Silence Therapeutics PLC

Esperion Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Esperion Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Silence Therapeutics PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silence Therapeutics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Esperion Therapeutics and Silence Therapeutics

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

The idea behind Esperion Therapeutics and Silence Therapeutics PLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.