Correlation Between Esperion Therapeutics and Prelude Therapeutics

Can any of the company-specific risk be diversified away by investing in both Esperion Therapeutics and Prelude 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 Prelude 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 Prelude Therapeutics, you can compare the effects of market volatilities on Esperion Therapeutics and Prelude 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 Prelude Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esperion Therapeutics and Prelude Therapeutics.

Diversification Opportunities for Esperion Therapeutics and Prelude Therapeutics

0.83

Correlation Coefficient

Esperion Therapeutics  Prelude Therapeutics

Very poor diversification

The 3 months correlation between Esperion and Prelude is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and Prelude Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prelude 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 Prelude Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prelude Therapeutics has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and Prelude Therapeutics go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Prelude Therapeutics

Given the investment horizon of 90 days Esperion Therapeutics is expected to under-perform the Prelude Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Esperion Therapeutics is 1.69 times less risky than Prelude Therapeutics. The stock trades about -0.14 of its potential returns per unit of risk. The Prelude Therapeutics is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  121.00  in Prelude Therapeutics on December 29, 2024 and sell it today you would lose (41.00) from holding Prelude Therapeutics or give up 33.88% of portfolio value over 90 days.

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

Esperion Therapeutics  vs.  Prelude Therapeutics

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.

Prelude Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prelude Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Esperion Therapeutics and Prelude Therapeutics

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

The idea behind Esperion Therapeutics and Prelude 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.