Correlation Between Intracellular and Esperion Therapeutics

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

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

Diversification Opportunities for Intracellular and Esperion Therapeutics

0.73

Correlation Coefficient

Intracellular  Esperion Therapeutics

Poor diversification

The 3 months correlation between Intracellular and Esperion is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Intracellular Th and Esperion Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esperion Therapeutics and Intracellular 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 Intracellular Th are associated (or correlated) with Esperion Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esperion Therapeutics has no effect on the direction of Intracellular i.e., Intracellular and Esperion Therapeutics go up and down completely randomly.

Pair Corralation between Intracellular and Esperion Therapeutics

Given the investment horizon of 90 days Intracellular is expected to generate 2.13 times less return on investment than Esperion Therapeutics. But when comparing it to its historical volatility, Intracellular Th is 2.18 times less risky than Esperion Therapeutics. It trades about 0.14 of its potential returns per unit of risk. Esperion Therapeutics is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Esperion Therapeutics on August 31, 2024 and sell it today you would earn a total of  71.00  from holding Esperion Therapeutics or generate 38.8% return on investment over 90 days.

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

Intracellular Th  vs.  Esperion Therapeutics

Intracellular Th

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intracellular Th are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Intracellular demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Esperion Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Esperion Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intracellular and Esperion Therapeutics

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

The idea behind Intracellular Th and Esperion 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.