Correlation Between Erasca and Adagene
Can any of the company-specific risk be diversified away by investing in both Erasca and Adagene 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 Erasca and Adagene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erasca Inc and Adagene, you can compare the effects of market volatilities on Erasca and Adagene 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 Erasca with a short position of Adagene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erasca and Adagene.
Diversification Opportunities for Erasca and Adagene
Very weak diversification
The 3 months correlation between Erasca and Adagene is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Erasca Inc and Adagene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adagene and Erasca 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 Erasca Inc are associated (or correlated) with Adagene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adagene has no effect on the direction of Erasca i.e., Erasca and Adagene go up and down completely randomly.
Pair Corralation between Erasca and Adagene
Given the investment horizon of 90 days Erasca Inc is expected to generate 0.75 times more return on investment than Adagene. However, Erasca Inc is 1.34 times less risky than Adagene. It trades about 0.08 of its potential returns per unit of risk. Adagene is currently generating about -0.24 per unit of risk. If you would invest 264.00 in Erasca Inc on August 29, 2024 and sell it today you would earn a total of 14.00 from holding Erasca Inc or generate 5.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erasca Inc vs. Adagene
Performance |
| Timeline |
| Erasca Inc |
| Adagene |
Erasca and Adagene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erasca and Adagene
The main advantage of trading using opposite Erasca and Adagene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erasca position performs unexpectedly, Adagene 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 Adagene will offset losses from the drop in Adagene's long position.| Erasca vs. Eliem Therapeutics | Erasca vs. Scpharmaceuticals | Erasca vs. Milestone Pharmaceuticals | Erasca vs. Seres Therapeutics |
| Adagene vs. Eliem Therapeutics | Adagene vs. Scpharmaceuticals | Adagene vs. Milestone Pharmaceuticals | Adagene vs. Seres Therapeutics |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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