Correlation Between Verastem and Trevena
Can any of the company-specific risk be diversified away by investing in both Verastem and Trevena 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 Trevena into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verastem and Trevena, you can compare the effects of market volatilities on Verastem and Trevena 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 Trevena. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verastem and Trevena.
Diversification Opportunities for Verastem and Trevena
Excellent diversification
The 3 months correlation between Verastem and Trevena is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Trevena in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trevena 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 Trevena. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trevena has no effect on the direction of Verastem i.e., Verastem and Trevena go up and down completely randomly.
Pair Corralation between Verastem and Trevena
Given the investment horizon of 90 days Verastem is expected to generate 0.46 times more return on investment than Trevena. However, Verastem is 2.16 times less risky than Trevena. It trades about 0.15 of its potential returns per unit of risk. Trevena is currently generating about -0.04 per unit of risk. If you would invest 220.00 in Verastem on November 3, 2024 and sell it today you would earn a total of 388.00 from holding Verastem or generate 176.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 40.8% |
| Values | Daily Returns |
Verastem vs. Trevena
Performance |
| Timeline |
| Verastem |
| Trevena |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Verastem and Trevena Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verastem and Trevena
The main advantage of trading using opposite Verastem and Trevena positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verastem position performs unexpectedly, Trevena 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 Trevena will offset losses from the drop in Trevena's long position.The idea behind Verastem and Trevena 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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