Correlation Between Medpace Holdings and Aclaris Therapeutics

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

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

Diversification Opportunities for Medpace Holdings and Aclaris Therapeutics

0.06

Correlation Coefficient

Medpace Holdings  Aclaris Therapeutics

Significant diversification

The 3 months correlation between Medpace and Aclaris is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Medpace Holdings and Aclaris Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aclaris Therapeutics and Medpace Holdings 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 Medpace Holdings are associated (or correlated) with Aclaris Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aclaris Therapeutics has no effect on the direction of Medpace Holdings i.e., Medpace Holdings and Aclaris Therapeutics go up and down completely randomly.

Pair Corralation between Medpace Holdings and Aclaris Therapeutics

Given the investment horizon of 90 days Medpace Holdings is expected to generate 0.34 times more return on investment than Aclaris Therapeutics. However, Medpace Holdings is 2.94 times less risky than Aclaris Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Aclaris Therapeutics is currently generating about -0.35 per unit of risk. If you would invest  33,782  in Medpace Holdings on September 25, 2024 and sell it today you would earn a total of  123.00  from holding Medpace Holdings or generate 0.36% return on investment over 90 days.

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

Medpace Holdings  vs.  Aclaris Therapeutics

Medpace Holdings

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medpace Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Medpace Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aclaris Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aclaris Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Aclaris Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medpace Holdings and Aclaris Therapeutics

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

The idea behind Medpace Holdings and Aclaris 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.