Correlation Between IVERIC Bio and Travere Therapeutics

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

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

Diversification Opportunities for IVERIC Bio and Travere Therapeutics

0.9

Correlation Coefficient

IVERIC Bio  Travere Therapeutics

Almost no diversification

The 3 months correlation between IVERIC and Travere is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding IVERIC Bio and Travere Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travere Therapeutics and IVERIC Bio 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 IVERIC Bio are associated (or correlated) with Travere Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travere Therapeutics has no effect on the direction of IVERIC Bio i.e., IVERIC Bio and Travere Therapeutics go up and down completely randomly.

Pair Corralation between IVERIC Bio and Travere Therapeutics

If you would invest  1,776  in Travere Therapeutics on August 31, 2024 and sell it today you would earn a total of  94.00  from holding Travere Therapeutics or generate 5.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	4.55%
Values	Daily Returns

IVERIC Bio  vs.  Travere Therapeutics

IVERIC Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IVERIC Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, IVERIC Bio is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Travere Therapeutics

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Travere Therapeutics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Travere Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IVERIC Bio and Travere Therapeutics

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

The idea behind IVERIC Bio and Travere Therapeutics 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.