Correlation Between Enanta Pharmaceuticals and Phathom Pharmaceuticals

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

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

Diversification Opportunities for Enanta Pharmaceuticals and Phathom Pharmaceuticals

0.77

Correlation Coefficient

Enanta Pharmaceuticals  Phathom Pharmaceuticals

Poor diversification

The 3 months correlation between Enanta and Phathom is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Enanta Pharmaceuticals and Phathom Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phathom Pharmaceuticals 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 Phathom Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phathom Pharmaceuticals has no effect on the direction of Enanta Pharmaceuticals i.e., Enanta Pharmaceuticals and Phathom Pharmaceuticals go up and down completely randomly.

Pair Corralation between Enanta Pharmaceuticals and Phathom Pharmaceuticals

Given the investment horizon of 90 days Enanta Pharmaceuticals is expected to generate 0.46 times more return on investment than Phathom Pharmaceuticals. However, Enanta Pharmaceuticals is 2.19 times less risky than Phathom Pharmaceuticals. It trades about -0.17 of its potential returns per unit of risk. Phathom Pharmaceuticals is currently generating about -0.16 per unit of risk. If you would invest  1,184  in Enanta Pharmaceuticals on September 5, 2024 and sell it today you would lose (308.00) from holding Enanta Pharmaceuticals or give up 26.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Enanta Pharmaceuticals  vs.  Phathom Pharmaceuticals

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 conflicting 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.

Phathom Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phathom Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Enanta Pharmaceuticals and Phathom Pharmaceuticals

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

The idea behind Enanta Pharmaceuticals and Phathom Pharmaceuticals 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.