Correlation Between Keros Therapeutics and Erytech Pharma

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

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

Diversification Opportunities for Keros Therapeutics and Erytech Pharma

-0.1

Correlation Coefficient

Keros Therapeutics  Erytech Pharma

Good diversification

The 3 months correlation between Keros and Erytech is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Keros Therapeutics and Erytech Pharma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erytech Pharma SA and Keros 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 Keros Therapeutics are associated (or correlated) with Erytech Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erytech Pharma SA has no effect on the direction of Keros Therapeutics i.e., Keros Therapeutics and Erytech Pharma go up and down completely randomly.

Pair Corralation between Keros Therapeutics and Erytech Pharma

Given the investment horizon of 90 days Keros Therapeutics is expected to generate 9.07 times less return on investment than Erytech Pharma. But when comparing it to its historical volatility, Keros Therapeutics is 2.75 times less risky than Erytech Pharma. It trades about 0.02 of its potential returns per unit of risk. Erytech Pharma SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Erytech Pharma SA on September 3, 2024 and sell it today you would earn a total of  28.00  from holding Erytech Pharma SA or generate 56.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	27.47%
Values	Daily Returns

Keros Therapeutics  vs.  Erytech Pharma SA

Keros Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keros Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Keros Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Erytech Pharma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erytech Pharma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Erytech Pharma is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Keros Therapeutics and Erytech Pharma

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

The idea behind Keros Therapeutics and Erytech Pharma SA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.