Correlation Between Esperion Therapeutics and 2Seventy Bio

Can any of the company-specific risk be diversified away by investing in both Esperion Therapeutics and 2Seventy Bio 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 2Seventy Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Esperion Therapeutics and 2Seventy Bio, you can compare the effects of market volatilities on Esperion Therapeutics and 2Seventy Bio 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 2Seventy Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esperion Therapeutics and 2Seventy Bio.

Diversification Opportunities for Esperion Therapeutics and 2Seventy Bio

-0.49

Correlation Coefficient

Esperion Therapeutics  2Seventy Bio

Very good diversification

The 3 months correlation between Esperion and 2Seventy is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and 2Seventy Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2Seventy Bio 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 2Seventy Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2Seventy Bio has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and 2Seventy Bio go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and 2Seventy Bio

Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 1.14 times more return on investment than 2Seventy Bio. However, Esperion Therapeutics is 1.14 times more volatile than 2Seventy Bio. It trades about 0.16 of its potential returns per unit of risk. 2Seventy Bio is currently generating about -0.02 per unit of risk. If you would invest  183.00  in Esperion Therapeutics on September 3, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Esperion Therapeutics  vs.  2Seventy Bio

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.

2Seventy Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 2Seventy Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, 2Seventy Bio is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Esperion Therapeutics and 2Seventy Bio

The main advantage of trading using opposite Esperion Therapeutics and 2Seventy Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Esperion Therapeutics position performs unexpectedly, 2Seventy Bio 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 2Seventy Bio will offset losses from the drop in 2Seventy Bio's long position.

The idea behind Esperion Therapeutics and 2Seventy Bio 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.