Correlation Between PIONEER and Esperion Therapeutics

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

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

Diversification Opportunities for PIONEER and Esperion Therapeutics

-0.6

Correlation Coefficient

PIONEER  Esperion Therapeutics

Excellent diversification

The 3 months correlation between PIONEER and Esperion is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PIONEER NATURAL RESOURCES and Esperion Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esperion Therapeutics and PIONEER 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 PIONEER NATURAL RESOURCES are associated (or correlated) with Esperion Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esperion Therapeutics has no effect on the direction of PIONEER i.e., PIONEER and Esperion Therapeutics go up and down completely randomly.

Pair Corralation between PIONEER and Esperion Therapeutics

Assuming the 90 days trading horizon PIONEER NATURAL RESOURCES is expected to under-perform the Esperion Therapeutics. But the bond apears to be less risky and, when comparing its historical volatility, PIONEER NATURAL RESOURCES is 10.12 times less risky than Esperion Therapeutics. The bond trades about -0.1 of its potential returns per unit of risk. The Esperion Therapeutics is currently generating about 0.16 of returns per unit of risk over similar time horizon. 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	Weak
Accuracy	96.88%
Values	Daily Returns

PIONEER NATURAL RESOURCES  vs.  Esperion Therapeutics

PIONEER NATURAL RESOURCES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIONEER NATURAL RESOURCES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PIONEER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with PIONEER and Esperion Therapeutics

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

The idea behind PIONEER NATURAL RESOURCES and Esperion 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..