Correlation Between Erasca and RAPT Therapeutics

Can any of the company-specific risk be diversified away by investing in both Erasca and RAPT 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 RAPT 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 RAPT Therapeutics, you can compare the effects of market volatilities on Erasca and RAPT 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 RAPT Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erasca and RAPT Therapeutics.

Diversification Opportunities for Erasca and RAPT Therapeutics

0.32

Correlation Coefficient

Erasca  RAPT Therapeutics

Weak diversification

The 3 months correlation between Erasca and RAPT is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Erasca Inc and RAPT Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAPT 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 RAPT Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAPT Therapeutics has no effect on the direction of Erasca i.e., Erasca and RAPT Therapeutics go up and down completely randomly.

Pair Corralation between Erasca and RAPT Therapeutics

Given the investment horizon of 90 days Erasca Inc is expected to generate 0.52 times more return on investment than RAPT Therapeutics. However, Erasca Inc is 1.91 times less risky than RAPT Therapeutics. It trades about 0.06 of its potential returns per unit of risk. RAPT Therapeutics is currently generating about -0.07 per unit of risk. If you would invest  185.00  in Erasca Inc on September 2, 2024 and sell it today you would earn a total of  101.00  from holding Erasca Inc or generate 54.59% return on investment over 90 days.

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

Erasca Inc  vs.  RAPT Therapeutics

Erasca Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erasca Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Erasca may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RAPT Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Erasca and RAPT Therapeutics

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

The idea behind Erasca Inc and RAPT 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.