Correlation Between Verastem and Ascletis Pharma

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

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

Diversification Opportunities for Verastem and Ascletis Pharma

0.7

Correlation Coefficient

Verastem  Ascletis Pharma

Poor diversification

The 3 months correlation between Verastem and Ascletis is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Ascletis Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascletis Pharma and Verastem 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 Verastem are associated (or correlated) with Ascletis Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascletis Pharma has no effect on the direction of Verastem i.e., Verastem and Ascletis Pharma go up and down completely randomly.

Pair Corralation between Verastem and Ascletis Pharma

Given the investment horizon of 90 days Verastem is expected to generate 2.15 times more return on investment than Ascletis Pharma. However, Verastem is 2.15 times more volatile than Ascletis Pharma. It trades about 0.07 of its potential returns per unit of risk. Ascletis Pharma is currently generating about 0.07 per unit of risk. If you would invest  394.00  in Verastem on August 31, 2024 and sell it today you would earn a total of  140.00  from holding Verastem or generate 35.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Verastem  vs.  Ascletis Pharma

Verastem

Risk-Adjusted Performance

18 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Verastem displayed solid returns over the last few months and may actually be approaching a breakup point.

Ascletis Pharma

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ascletis Pharma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, Ascletis Pharma reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verastem and Ascletis Pharma

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

The idea behind Verastem and Ascletis Pharma 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.