Correlation Between Enanta Pharmaceuticals and Revolution Medicines

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

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

Diversification Opportunities for Enanta Pharmaceuticals and Revolution Medicines

-0.28

Correlation Coefficient

Enanta Pharmaceuticals  Revolution Medicines

Very good diversification

The 3 months correlation between Enanta and Revolution is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Enanta Pharmaceuticals and Revolution Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Medicines 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 Revolution Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Medicines has no effect on the direction of Enanta Pharmaceuticals i.e., Enanta Pharmaceuticals and Revolution Medicines go up and down completely randomly.

Pair Corralation between Enanta Pharmaceuticals and Revolution Medicines

Given the investment horizon of 90 days Enanta Pharmaceuticals is expected to generate 2.19 times more return on investment than Revolution Medicines. However, Enanta Pharmaceuticals is 2.19 times more volatile than Revolution Medicines. It trades about 0.02 of its potential returns per unit of risk. Revolution Medicines is currently generating about -0.08 per unit of risk. If you would invest  585.00  in Enanta Pharmaceuticals on December 30, 2024 and sell it today you would lose (14.00) from holding Enanta Pharmaceuticals or give up 2.39% of portfolio value over 90 days.

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

Enanta Pharmaceuticals  vs.  Revolution Medicines

Enanta Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enanta Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Enanta Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Revolution Medicines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Revolution Medicines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Enanta Pharmaceuticals and Revolution Medicines

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

The idea behind Enanta Pharmaceuticals and Revolution Medicines 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.