Correlation Between Enanta Pharmaceuticals and Ocular Therapeutix

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

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

Diversification Opportunities for Enanta Pharmaceuticals and Ocular Therapeutix

0.33

Correlation Coefficient

Enanta Pharmaceuticals  Ocular Therapeutix

Weak diversification

The 3 months correlation between Enanta and Ocular is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Enanta Pharmaceuticals and Ocular Therapeutix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocular Therapeutix and Enanta 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 Enanta Pharmaceuticals are associated (or correlated) with Ocular Therapeutix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocular Therapeutix has no effect on the direction of Enanta Pharmaceuticals i.e., Enanta Pharmaceuticals and Ocular Therapeutix go up and down completely randomly.

Pair Corralation between Enanta Pharmaceuticals and Ocular Therapeutix

Given the investment horizon of 90 days Enanta Pharmaceuticals is expected to under-perform the Ocular Therapeutix. In addition to that, Enanta Pharmaceuticals is 1.09 times more volatile than Ocular Therapeutix. It trades about -0.21 of its total potential returns per unit of risk. Ocular Therapeutix is currently generating about 0.04 per unit of volatility. If you would invest  900.00  in Ocular Therapeutix on September 13, 2024 and sell it today you would earn a total of  44.00  from holding Ocular Therapeutix or generate 4.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Enanta Pharmaceuticals  vs.  Ocular Therapeutix

Enanta Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enanta Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ocular Therapeutix

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ocular Therapeutix are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Ocular Therapeutix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enanta Pharmaceuticals and Ocular Therapeutix

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

The idea behind Enanta Pharmaceuticals and Ocular Therapeutix 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.