Correlation Between ESSA Pharma and Viatris

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

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

Diversification Opportunities for ESSA Pharma and Viatris

-0.83

Correlation Coefficient

ESSA Pharma  Viatris

Pay attention - limited upside

The 3 months correlation between ESSA and Viatris is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and Viatris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viatris 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 Viatris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viatris has no effect on the direction of ESSA Pharma i.e., ESSA Pharma and Viatris go up and down completely randomly.

Pair Corralation between ESSA Pharma and Viatris

Given the investment horizon of 90 days ESSA Pharma is expected to under-perform the Viatris. In addition to that, ESSA Pharma is 3.81 times more volatile than Viatris. It trades about -0.04 of its total potential returns per unit of risk. Viatris is currently generating about 0.09 per unit of volatility. If you would invest  1,011  in Viatris on September 23, 2024 and sell it today you would earn a total of  241.00  from holding Viatris or generate 23.84% return on investment over 90 days.

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

ESSA Pharma  vs.  Viatris

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 unsteady 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.

Viatris

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Viatris may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ESSA Pharma and Viatris

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

The idea behind ESSA Pharma and Viatris 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.