Correlation Between Esperion Therapeutics and Gossamer Bio

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

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

Diversification Opportunities for Esperion Therapeutics and Gossamer Bio

-0.7

Correlation Coefficient

Esperion Therapeutics  Gossamer Bio

Excellent diversification

The 3 months correlation between Esperion and Gossamer is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and Gossamer Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gossamer Bio 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 Gossamer Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gossamer Bio has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and Gossamer Bio go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Gossamer Bio

Given the investment horizon of 90 days Esperion Therapeutics is expected to under-perform the Gossamer Bio. But the stock apears to be less risky and, when comparing its historical volatility, Esperion Therapeutics is 1.11 times less risky than Gossamer Bio. The stock trades about -0.13 of its potential returns per unit of risk. The Gossamer Bio is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Gossamer Bio on November 29, 2024 and sell it today you would earn a total of  55.50  from holding Gossamer Bio or generate 79.29% return on investment over 90 days.

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

Esperion Therapeutics  vs.  Gossamer Bio

Esperion Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esperion Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Gossamer Bio

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gossamer Bio are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Gossamer Bio unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Esperion Therapeutics and Gossamer Bio

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

The idea behind Esperion Therapeutics and Gossamer Bio 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.