Correlation Between Edgewise Therapeutics and Perrigo Company

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

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

Diversification Opportunities for Edgewise Therapeutics and Perrigo Company

-0.36

Correlation Coefficient

Edgewise Therapeutics  Perrigo Company

Very good diversification

The 3 months correlation between Edgewise and Perrigo is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics and Perrigo Company PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perrigo Company and Edgewise 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 Edgewise Therapeutics are associated (or correlated) with Perrigo Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perrigo Company has no effect on the direction of Edgewise Therapeutics i.e., Edgewise Therapeutics and Perrigo Company go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and Perrigo Company

Given the investment horizon of 90 days Edgewise Therapeutics is expected to under-perform the Perrigo Company. In addition to that, Edgewise Therapeutics is 1.19 times more volatile than Perrigo Company PLC. It trades about -0.05 of its total potential returns per unit of risk. Perrigo Company PLC is currently generating about 0.08 per unit of volatility. If you would invest  2,503  in Perrigo Company PLC on December 29, 2024 and sell it today you would earn a total of  303.00  from holding Perrigo Company PLC or generate 12.11% return on investment over 90 days.

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

Edgewise Therapeutics  vs.  Perrigo Company PLC

Edgewise Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edgewise Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Perrigo Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Perrigo Company PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Perrigo Company displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edgewise Therapeutics and Perrigo Company

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

The idea behind Edgewise Therapeutics and Perrigo Company PLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.