Correlation Between Verastem and Oncology Pharma
Can any of the company-specific risk be diversified away by investing in both Verastem and Oncology 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 Oncology Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verastem and Oncology Pharma, you can compare the effects of market volatilities on Verastem and Oncology 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 Oncology Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verastem and Oncology Pharma.
Diversification Opportunities for Verastem and Oncology Pharma
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Verastem and Oncology is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Oncology Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oncology 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 Oncology Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oncology Pharma has no effect on the direction of Verastem i.e., Verastem and Oncology Pharma go up and down completely randomly.
Pair Corralation between Verastem and Oncology Pharma
Given the investment horizon of 90 days Verastem is expected to generate 53.54 times less return on investment than Oncology Pharma. But when comparing it to its historical volatility, Verastem is 47.32 times less risky than Oncology Pharma. It trades about 0.25 of its potential returns per unit of risk. Oncology Pharma is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Oncology Pharma on September 2, 2024 and sell it today you would earn a total of 0.00 from holding Oncology Pharma or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Verastem vs. Oncology Pharma
Performance |
| Timeline |
| Verastem |
| Oncology Pharma |
Verastem and Oncology Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verastem and Oncology Pharma
The main advantage of trading using opposite Verastem and Oncology Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verastem position performs unexpectedly, Oncology 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 Oncology Pharma will offset losses from the drop in Oncology Pharma's long position.The idea behind Verastem and Oncology 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.| Oncology Pharma vs. Regen BioPharma | Oncology Pharma vs. Regen BioPharma | Oncology Pharma vs. Therapeutic Solutions International | Oncology Pharma vs. Alpha Cognition |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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