Correlation Between Connect Biopharma and Erasca

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

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

Diversification Opportunities for Connect Biopharma and Erasca

-0.24

Correlation Coefficient

Connect Biopharma  Erasca

Very good diversification

The 3 months correlation between Connect and Erasca is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings and Erasca Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erasca Inc and Connect Biopharma 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 Connect Biopharma Holdings 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 Connect Biopharma i.e., Connect Biopharma and Erasca go up and down completely randomly.

Pair Corralation between Connect Biopharma and Erasca

Given the investment horizon of 90 days Connect Biopharma Holdings is expected to under-perform the Erasca. In addition to that, Connect Biopharma is 1.27 times more volatile than Erasca Inc. It trades about -0.04 of its total potential returns per unit of risk. Erasca Inc is currently generating about 0.04 per unit of volatility. If you would invest  274.00  in Erasca Inc on September 2, 2024 and sell it today you would earn a total of  12.00  from holding Erasca Inc or generate 4.38% return on investment over 90 days.

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

Connect Biopharma Holdings  vs.  Erasca Inc

Connect Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Connect Biopharma and Erasca

The main advantage of trading using opposite Connect Biopharma and Erasca positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connect Biopharma 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 Connect Biopharma Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.