Correlation Between Tarsus Pharmaceuticals and Sealed Air

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

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

Diversification Opportunities for Tarsus Pharmaceuticals and Sealed Air

-0.4

Correlation Coefficient

Tarsus Pharmaceuticals  Sealed Air

Very good diversification

The 3 months correlation between Tarsus and Sealed is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tarsus Pharmaceuticals and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air and Tarsus Pharmaceuticals 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 Tarsus Pharmaceuticals are associated (or correlated) with Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Tarsus Pharmaceuticals i.e., Tarsus Pharmaceuticals and Sealed Air go up and down completely randomly.

Pair Corralation between Tarsus Pharmaceuticals and Sealed Air

Given the investment horizon of 90 days Tarsus Pharmaceuticals is expected to generate 1.97 times more return on investment than Sealed Air. However, Tarsus Pharmaceuticals is 1.97 times more volatile than Sealed Air. It trades about 0.08 of its potential returns per unit of risk. Sealed Air is currently generating about -0.03 per unit of risk. If you would invest  1,565  in Tarsus Pharmaceuticals on October 23, 2024 and sell it today you would earn a total of  3,087  from holding Tarsus Pharmaceuticals or generate 197.25% return on investment over 90 days.

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

Tarsus Pharmaceuticals  vs.  Sealed Air

Tarsus Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tarsus Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Tarsus Pharmaceuticals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sealed Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tarsus Pharmaceuticals and Sealed Air

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

The idea behind Tarsus Pharmaceuticals and Sealed Air 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.