Correlation Between Amicus Therapeutics and Tarsus Pharmaceuticals

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

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

Diversification Opportunities for Amicus Therapeutics and Tarsus Pharmaceuticals

0.48

Correlation Coefficient

Amicus Therapeutics  Tarsus Pharmaceuticals

Very weak diversification

The 3 months correlation between Amicus and Tarsus is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Amicus Therapeutics and Tarsus Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarsus Pharmaceuticals and Amicus 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 Amicus Therapeutics are associated (or correlated) with Tarsus Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarsus Pharmaceuticals has no effect on the direction of Amicus Therapeutics i.e., Amicus Therapeutics and Tarsus Pharmaceuticals go up and down completely randomly.

Pair Corralation between Amicus Therapeutics and Tarsus Pharmaceuticals

Given the investment horizon of 90 days Amicus Therapeutics is expected to under-perform the Tarsus Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Amicus Therapeutics is 2.06 times less risky than Tarsus Pharmaceuticals. The stock trades about -0.1 of its potential returns per unit of risk. The Tarsus Pharmaceuticals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,470  in Tarsus Pharmaceuticals on December 28, 2024 and sell it today you would lose (296.00) from holding Tarsus Pharmaceuticals or give up 5.41% of portfolio value over 90 days.

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

Amicus Therapeutics  vs.  Tarsus Pharmaceuticals

Amicus Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amicus Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Tarsus Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tarsus Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Tarsus Pharmaceuticals is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Amicus Therapeutics and Tarsus Pharmaceuticals

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

The idea behind Amicus Therapeutics and Tarsus Pharmaceuticals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.