Correlation Between Tarsus Pharmaceuticals and Summit Therapeutics

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

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

Diversification Opportunities for Tarsus Pharmaceuticals and Summit Therapeutics

-0.57

Correlation Coefficient

Tarsus Pharmaceuticals  Summit Therapeutics

Excellent diversification

The 3 months correlation between Tarsus and Summit is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tarsus Pharmaceuticals and Summit Therapeutics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Therapeutics PLC 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 Summit Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Therapeutics PLC has no effect on the direction of Tarsus Pharmaceuticals i.e., Tarsus Pharmaceuticals and Summit Therapeutics go up and down completely randomly.

Pair Corralation between Tarsus Pharmaceuticals and Summit Therapeutics

Given the investment horizon of 90 days Tarsus Pharmaceuticals is expected to generate 1.65 times less return on investment than Summit Therapeutics. But when comparing it to its historical volatility, Tarsus Pharmaceuticals is 2.03 times less risky than Summit Therapeutics. It trades about 0.14 of its potential returns per unit of risk. Summit Therapeutics PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  790.00  in Summit Therapeutics PLC on October 13, 2024 and sell it today you would earn a total of  995.00  from holding Summit Therapeutics PLC or generate 125.95% 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.  Summit Therapeutics PLC

Tarsus Pharmaceuticals

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tarsus Pharmaceuticals are ranked lower than 18 (%) 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.

Summit Therapeutics PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Therapeutics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Tarsus Pharmaceuticals and Summit Therapeutics

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

The idea behind Tarsus Pharmaceuticals and Summit Therapeutics PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..