Correlation Between Centessa Pharmaceuticals and Erasca

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

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

Diversification Opportunities for Centessa Pharmaceuticals and Erasca

-0.05

Correlation Coefficient

Centessa Pharmaceuticals  Erasca

Good diversification

The 3 months correlation between Centessa and Erasca is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and Erasca Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erasca Inc and Centessa Pharmaceuticals 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 Centessa Pharmaceuticals PLC are associated (or correlated) with Erasca. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erasca Inc has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and Erasca go up and down completely randomly.

Pair Corralation between Centessa Pharmaceuticals and Erasca

Given the investment horizon of 90 days Centessa Pharmaceuticals PLC is expected to generate 0.9 times more return on investment than Erasca. However, Centessa Pharmaceuticals PLC is 1.11 times less risky than Erasca. It trades about 0.17 of its potential returns per unit of risk. Erasca Inc is currently generating about 0.04 per unit of risk. If you would invest  880.00  in Centessa Pharmaceuticals PLC on September 3, 2024 and sell it today you would earn a total of  911.00  from holding Centessa Pharmaceuticals PLC or generate 103.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Centessa Pharmaceuticals PLC  vs.  Erasca Inc

Centessa Pharmaceuticals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Centessa Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Erasca Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erasca Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Erasca may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Centessa Pharmaceuticals and Erasca

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

The idea behind Centessa Pharmaceuticals PLC and Erasca Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.