Correlation Between Esperion Therapeutics and Scholar Rock
Can any of the company-specific risk be diversified away by investing in both Esperion Therapeutics and Scholar Rock 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 Esperion Therapeutics and Scholar Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Esperion Therapeutics and Scholar Rock Holding, you can compare the effects of market volatilities on Esperion Therapeutics and Scholar Rock 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 Esperion Therapeutics with a short position of Scholar Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esperion Therapeutics and Scholar Rock.
Diversification Opportunities for Esperion Therapeutics and Scholar Rock
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Esperion and Scholar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and Scholar Rock Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholar Rock Holding and Esperion 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 Esperion Therapeutics are associated (or correlated) with Scholar Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholar Rock Holding has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and Scholar Rock go up and down completely randomly.
Pair Corralation between Esperion Therapeutics and Scholar Rock
Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 2.56 times less return on investment than Scholar Rock. In addition to that, Esperion Therapeutics is 1.28 times more volatile than Scholar Rock Holding. It trades about 0.12 of its total potential returns per unit of risk. Scholar Rock Holding is currently generating about 0.38 per unit of volatility. If you would invest 2,638 in Scholar Rock Holding on September 18, 2024 and sell it today you would earn a total of 1,705 from holding Scholar Rock Holding or generate 64.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Esperion Therapeutics vs. Scholar Rock Holding
Performance |
| Timeline |
| Esperion Therapeutics |
| Scholar Rock Holding |
Esperion Therapeutics and Scholar Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Esperion Therapeutics and Scholar Rock
The main advantage of trading using opposite Esperion Therapeutics and Scholar Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Esperion Therapeutics position performs unexpectedly, Scholar Rock 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 Scholar Rock will offset losses from the drop in Scholar Rock's long position.The idea behind Esperion Therapeutics and Scholar Rock Holding 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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