Correlation Between Foghorn Therapeutics and Erasca

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

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

Diversification Opportunities for Foghorn Therapeutics and Erasca

0.24

Correlation Coefficient

Foghorn Therapeutics  Erasca

Modest diversification

The 3 months correlation between Foghorn and Erasca is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Foghorn Therapeutics and Erasca Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erasca Inc and Foghorn 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 Foghorn Therapeutics are associated (or correlated) with Erasca. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erasca Inc has no effect on the direction of Foghorn Therapeutics i.e., Foghorn Therapeutics and Erasca go up and down completely randomly.

Pair Corralation between Foghorn Therapeutics and Erasca

Given the investment horizon of 90 days Foghorn Therapeutics is expected to under-perform the Erasca. In addition to that, Foghorn Therapeutics is 1.03 times more volatile than Erasca Inc. It trades about -0.19 of its total potential returns per unit of risk. Erasca Inc is currently generating about -0.02 per unit of volatility. If you would invest  289.00  in Erasca Inc on September 18, 2024 and sell it today you would lose (33.00) from holding Erasca Inc or give up 11.42% of portfolio value over 90 days.

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

Foghorn Therapeutics  vs.  Erasca Inc

Foghorn Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foghorn Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Erasca Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erasca Inc 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Foghorn Therapeutics and Erasca

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

The idea behind Foghorn Therapeutics and Erasca Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.