Correlation Between Esperion Therapeutics and MEI Pharma

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

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

Diversification Opportunities for Esperion Therapeutics and MEI Pharma

-0.32

Correlation Coefficient

Esperion Therapeutics  MEI Pharma

Very good diversification

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

Pair Corralation between Esperion Therapeutics and MEI Pharma

Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 2.59 times more return on investment than MEI Pharma. However, Esperion Therapeutics is 2.59 times more volatile than MEI Pharma. It trades about 0.09 of its potential returns per unit of risk. MEI Pharma is currently generating about -0.06 per unit of risk. If you would invest  178.00  in Esperion Therapeutics on September 17, 2024 and sell it today you would earn a total of  47.00  from holding Esperion Therapeutics or generate 26.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Esperion Therapeutics  vs.  MEI Pharma

Esperion Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Esperion Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

MEI Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MEI Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Esperion Therapeutics and MEI Pharma

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

The idea behind Esperion Therapeutics and MEI Pharma 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.