Correlation Between Eterna Therapeutics and Jazz Pharmaceuticals

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

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

Diversification Opportunities for Eterna Therapeutics and Jazz Pharmaceuticals

-0.53

Correlation Coefficient

Eterna Therapeutics  Jazz Pharmaceuticals

Excellent diversification

The 3 months correlation between Eterna and Jazz is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eterna Therapeutics and Jazz Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals PLC and Eterna Therapeutics 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 Eterna Therapeutics are associated (or correlated) with Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals PLC has no effect on the direction of Eterna Therapeutics i.e., Eterna Therapeutics and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between Eterna Therapeutics and Jazz Pharmaceuticals

Given the investment horizon of 90 days Eterna Therapeutics is expected to generate 7.17 times more return on investment than Jazz Pharmaceuticals. However, Eterna Therapeutics is 7.17 times more volatile than Jazz Pharmaceuticals PLC. It trades about 0.06 of its potential returns per unit of risk. Jazz Pharmaceuticals PLC is currently generating about 0.14 per unit of risk. If you would invest  25.00  in Eterna Therapeutics on December 21, 2024 and sell it today you would earn a total of  2.00  from holding Eterna Therapeutics or generate 8.0% return on investment over 90 days.

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

Eterna Therapeutics  vs.  Jazz Pharmaceuticals PLC

Eterna Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eterna Therapeutics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Eterna Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Jazz Pharmaceuticals PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Jazz Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eterna Therapeutics and Jazz Pharmaceuticals

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

The idea behind Eterna Therapeutics and Jazz Pharmaceuticals PLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.