Correlation Between NATIONAL and Esperion Therapeutics

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

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

Diversification Opportunities for NATIONAL and Esperion Therapeutics

0.37

Correlation Coefficient

NATIONAL  Esperion Therapeutics

Weak diversification

The 3 months correlation between NATIONAL and Esperion is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NATIONAL RURAL UTILS and Esperion Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esperion Therapeutics and NATIONAL 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 NATIONAL RURAL UTILS 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 NATIONAL i.e., NATIONAL and Esperion Therapeutics go up and down completely randomly.

Pair Corralation between NATIONAL and Esperion Therapeutics

Assuming the 90 days trading horizon NATIONAL RURAL UTILS is expected to under-perform the Esperion Therapeutics. But the bond apears to be less risky and, when comparing its historical volatility, NATIONAL RURAL UTILS is 4.15 times less risky than Esperion Therapeutics. The bond trades about -0.04 of its potential returns per unit of risk. The Esperion Therapeutics is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  172.00  in Esperion Therapeutics on September 5, 2024 and sell it today you would earn a total of  153.00  from holding Esperion Therapeutics or generate 88.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	42.19%
Values	Daily Returns

NATIONAL RURAL UTILS  vs.  Esperion Therapeutics

NATIONAL RURAL UTILS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NATIONAL RURAL UTILS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NATIONAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Esperion Therapeutics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Esperion Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NATIONAL and Esperion Therapeutics

The main advantage of trading using opposite NATIONAL and Esperion Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NATIONAL 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 NATIONAL RURAL UTILS 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.