Correlation Between Esperion Therapeutics and Senti Biosciences

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

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

Diversification Opportunities for Esperion Therapeutics and Senti Biosciences

-0.63

Correlation Coefficient

Esperion Therapeutics  Senti Biosciences

Excellent diversification

The 3 months correlation between Esperion and Senti is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and Senti Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senti Biosciences 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 Senti Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senti Biosciences has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and Senti Biosciences go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Senti Biosciences

Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 1.04 times more return on investment than Senti Biosciences. However, Esperion Therapeutics is 1.04 times more volatile than Senti Biosciences. It trades about 0.16 of its potential returns per unit of risk. Senti Biosciences is currently generating about -0.04 per unit of risk. If you would invest  183.00  in Esperion Therapeutics on September 2, 2024 and sell it today you would earn a total of  97.00  from holding Esperion Therapeutics or generate 53.01% 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.  Senti Biosciences

Esperion Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 12 (%) 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.

Senti Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Senti Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Esperion Therapeutics and Senti Biosciences

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

The idea behind Esperion Therapeutics and Senti 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.