Correlation Between Esperion Therapeutics and Checkpoint Therapeutics

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

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

Diversification Opportunities for Esperion Therapeutics and Checkpoint Therapeutics

0.84

Correlation Coefficient

Esperion Therapeutics  Checkpoint Therapeutics

Very poor diversification

The 3 months correlation between Esperion and Checkpoint is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and Checkpoint Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Checkpoint Therapeutics and Esperion 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 Esperion Therapeutics are associated (or correlated) with Checkpoint Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Checkpoint Therapeutics has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and Checkpoint Therapeutics go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Checkpoint Therapeutics

Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 1.49 times less return on investment than Checkpoint Therapeutics. In addition to that, Esperion Therapeutics is 1.19 times more volatile than Checkpoint Therapeutics. It trades about 0.16 of its total potential returns per unit of risk. Checkpoint Therapeutics is currently generating about 0.29 per unit of volatility. If you would invest  221.00  in Checkpoint Therapeutics on September 3, 2024 and sell it today you would earn a total of  218.00  from holding Checkpoint Therapeutics or generate 98.64% return on investment over 90 days.

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

Esperion Therapeutics  vs.  Checkpoint Therapeutics

Esperion Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Esperion Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Checkpoint Therapeutics

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Checkpoint Therapeutics are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Checkpoint Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Esperion Therapeutics and Checkpoint Therapeutics

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

The idea behind Esperion Therapeutics and Checkpoint 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.