Correlation Between Erasca and Werewolf Therapeutics

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

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

Diversification Opportunities for Erasca and Werewolf Therapeutics

0.83

Correlation Coefficient

Erasca  Werewolf Therapeutics

Very poor diversification

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

Pair Corralation between Erasca and Werewolf Therapeutics

Given the investment horizon of 90 days Erasca Inc is expected to under-perform the Werewolf Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Erasca Inc is 1.21 times less risky than Werewolf Therapeutics. The stock trades about -0.38 of its potential returns per unit of risk. The Werewolf Therapeutics is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  135.00  in Werewolf Therapeutics on December 1, 2024 and sell it today you would lose (11.00) from holding Werewolf Therapeutics or give up 8.15% of portfolio value over 90 days.

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

Erasca Inc  vs.  Werewolf Therapeutics

Erasca Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Erasca Inc 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Werewolf Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Werewolf Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Erasca and Werewolf Therapeutics

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

The idea behind Erasca Inc and Werewolf Therapeutics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.