Correlation Between Esperion Therapeutics and Novavax

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

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

Diversification Opportunities for Esperion Therapeutics and Novavax

0.31

Correlation Coefficient

Esperion Therapeutics  Novavax

Weak diversification

The 3 months correlation between Esperion and Novavax is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax 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 Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and Novavax go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Novavax

Given the investment horizon of 90 days Esperion Therapeutics is expected to generate 0.8 times more return on investment than Novavax. However, Esperion Therapeutics is 1.25 times less risky than Novavax. It trades about -0.01 of its potential returns per unit of risk. Novavax is currently generating about -0.07 per unit of risk. If you would invest  181.00  in Esperion Therapeutics on December 5, 2024 and sell it today you would lose (4.00) from holding Esperion Therapeutics or give up 2.21% of portfolio value over 90 days.

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

Esperion Therapeutics  vs.  Novavax

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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Novavax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novavax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Novavax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Esperion Therapeutics and Novavax

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

The idea behind Esperion Therapeutics and Novavax 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 Stocks Directory module to find actively traded stocks across global markets.