Correlation Between Verastem and VTv Therapeutics

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

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

Diversification Opportunities for Verastem and VTv Therapeutics

0.26

Correlation Coefficient

Verastem  VTv Therapeutics

Modest diversification

The 3 months correlation between Verastem and VTv is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and vTv Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on vTv Therapeutics and Verastem 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 Verastem are associated (or correlated) with VTv Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of vTv Therapeutics has no effect on the direction of Verastem i.e., Verastem and VTv Therapeutics go up and down completely randomly.

Pair Corralation between Verastem and VTv Therapeutics

Given the investment horizon of 90 days Verastem is expected to generate 0.88 times more return on investment than VTv Therapeutics. However, Verastem is 1.13 times less risky than VTv Therapeutics. It trades about 0.17 of its potential returns per unit of risk. vTv Therapeutics is currently generating about 0.07 per unit of risk. If you would invest  367.00  in Verastem on December 28, 2024 and sell it today you would earn a total of  306.00  from holding Verastem or generate 83.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Verastem  vs.  vTv Therapeutics

Verastem

Risk-Adjusted Performance

Good

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

vTv Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in vTv Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, VTv Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verastem and VTv Therapeutics

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

The idea behind Verastem and vTv 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.