Correlation Between Keros Therapeutics and Erasca

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

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

Diversification Opportunities for Keros Therapeutics and Erasca

0.12

Correlation Coefficient

Keros Therapeutics  Erasca

Average diversification

The 3 months correlation between Keros and Erasca is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Keros Therapeutics and Erasca Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erasca Inc and Keros 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 Keros 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 Keros Therapeutics i.e., Keros Therapeutics and Erasca go up and down completely randomly.

Pair Corralation between Keros Therapeutics and Erasca

Given the investment horizon of 90 days Keros Therapeutics is expected to generate 0.78 times more return on investment than Erasca. However, Keros Therapeutics is 1.28 times less risky than Erasca. It trades about 0.03 of its potential returns per unit of risk. Erasca Inc is currently generating about 0.0 per unit of risk. If you would invest  4,732  in Keros Therapeutics on September 1, 2024 and sell it today you would earn a total of  1,042  from holding Keros Therapeutics or generate 22.02% return on investment over 90 days.

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

Keros Therapeutics  vs.  Erasca Inc

Keros Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keros Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Keros Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Erasca Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erasca Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Erasca may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Keros Therapeutics and Erasca

The main advantage of trading using opposite Keros Therapeutics and Erasca positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keros 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 Keros 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.