Correlation Between Esperion Therapeutics and INC Research

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

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

Diversification Opportunities for Esperion Therapeutics and INC Research

-0.8

Correlation Coefficient

Esperion Therapeutics  INC Research

Pay attention - limited upside

The 3 months correlation between Esperion and INC is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and INC Research Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INC Research Holdings 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 INC Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INC Research Holdings has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and INC Research go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and INC Research

Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 1.02 times more return on investment than INC Research. However, Esperion Therapeutics is 1.02 times more volatile than INC Research Holdings. It trades about 0.14 of its potential returns per unit of risk. INC Research Holdings is currently generating about -0.13 per unit of risk. If you would invest  183.00  in Esperion Therapeutics on August 31, 2024 and sell it today you would earn a total of  71.00  from holding Esperion Therapeutics or generate 38.8% return on investment over 90 days.

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

Esperion Therapeutics  vs.  INC Research Holdings

Esperion Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Esperion Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

INC Research Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Esperion Therapeutics and INC Research

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

The idea behind Esperion Therapeutics and INC Research Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..