Correlation Between ESSA Pharma and Equillium

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

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

Diversification Opportunities for ESSA Pharma and Equillium

0.56

Correlation Coefficient

ESSA Pharma  Equillium

Very weak diversification

The 3 months correlation between ESSA and Equillium is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium and ESSA Pharma 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 ESSA Pharma are associated (or correlated) with Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of ESSA Pharma i.e., ESSA Pharma and Equillium go up and down completely randomly.

Pair Corralation between ESSA Pharma and Equillium

Given the investment horizon of 90 days ESSA Pharma is expected to under-perform the Equillium. In addition to that, ESSA Pharma is 1.31 times more volatile than Equillium. It trades about -0.12 of its total potential returns per unit of risk. Equillium is currently generating about 0.0 per unit of volatility. If you would invest  87.00  in Equillium on September 12, 2024 and sell it today you would lose (17.00) from holding Equillium or give up 19.54% of portfolio value over 90 days.

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

ESSA Pharma  vs.  Equillium

ESSA Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSA Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain fairly 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.

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equillium is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ESSA Pharma and Equillium

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

The idea behind ESSA Pharma and Equillium 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.