Correlation Between Eton Pharmaceuticals and Fulcrum Therapeutics

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

By analyzing existing cross correlation between Eton Pharmaceuticals and Fulcrum Therapeutics, you can compare the effects of market volatilities on Eton Pharmaceuticals and Fulcrum 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 Eton Pharmaceuticals with a short position of Fulcrum Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eton Pharmaceuticals and Fulcrum Therapeutics.

Diversification Opportunities for Eton Pharmaceuticals and Fulcrum Therapeutics

-0.53

Correlation Coefficient

Eton Pharmaceuticals  Fulcrum Therapeutics

Excellent diversification

The 3 months correlation between Eton and Fulcrum is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eton Pharmaceuticals and Fulcrum Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulcrum Therapeutics and Eton Pharmaceuticals 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 Eton Pharmaceuticals are associated (or correlated) with Fulcrum Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulcrum Therapeutics has no effect on the direction of Eton Pharmaceuticals i.e., Eton Pharmaceuticals and Fulcrum Therapeutics go up and down completely randomly.

Pair Corralation between Eton Pharmaceuticals and Fulcrum Therapeutics

Given the investment horizon of 90 days Eton Pharmaceuticals is expected to generate 0.48 times more return on investment than Fulcrum Therapeutics. However, Eton Pharmaceuticals is 2.1 times less risky than Fulcrum Therapeutics. It trades about 0.39 of its potential returns per unit of risk. Fulcrum Therapeutics is currently generating about -0.06 per unit of risk. If you would invest  461.00  in Eton Pharmaceuticals on September 4, 2024 and sell it today you would earn a total of  785.00  from holding Eton Pharmaceuticals or generate 170.28% return on investment over 90 days.

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

Eton Pharmaceuticals  vs.  Fulcrum Therapeutics

Eton Pharmaceuticals

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Eton Pharmaceuticals are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eton Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Fulcrum Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulcrum 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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Eton Pharmaceuticals and Fulcrum Therapeutics

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

The idea behind Eton Pharmaceuticals and Fulcrum 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.