Correlation Between ESSA Pharma and Erasca

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

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

Diversification Opportunities for ESSA Pharma and Erasca

-0.39

Correlation Coefficient

ESSA Pharma  Erasca

Very good diversification

The 3 months correlation between ESSA and Erasca is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and Erasca Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erasca Inc 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 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 ESSA Pharma i.e., ESSA Pharma and Erasca go up and down completely randomly.

Pair Corralation between ESSA Pharma and Erasca

Given the investment horizon of 90 days ESSA Pharma is expected to under-perform the Erasca. But the stock apears to be less risky and, when comparing its historical volatility, ESSA Pharma is 4.2 times less risky than Erasca. The stock trades about -0.52 of its potential returns per unit of risk. The Erasca Inc is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  276.00  in Erasca Inc on September 24, 2024 and sell it today you would lose (22.00) from holding Erasca Inc or give up 7.97% of portfolio value over 90 days.

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

ESSA Pharma  vs.  Erasca Inc

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 unfluctuating 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.

Erasca Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erasca Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Erasca is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ESSA Pharma and Erasca

The main advantage of trading using opposite ESSA Pharma and Erasca positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Pharma 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 ESSA Pharma 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.