Correlation Between Verastem and Vyne Therapeutics

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

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

Diversification Opportunities for Verastem and Vyne Therapeutics

-0.43

Correlation Coefficient

Verastem  Vyne Therapeutics

Very good diversification

The 3 months correlation between Verastem and Vyne is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Vyne Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vyne 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 Vyne Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vyne Therapeutics has no effect on the direction of Verastem i.e., Verastem and Vyne Therapeutics go up and down completely randomly.

Pair Corralation between Verastem and Vyne Therapeutics

Given the investment horizon of 90 days Verastem is expected to generate 1.57 times more return on investment than Vyne Therapeutics. However, Verastem is 1.57 times more volatile than Vyne Therapeutics. It trades about 0.15 of its potential returns per unit of risk. Vyne Therapeutics is currently generating about -0.18 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  252.00  from holding Verastem or generate 68.66% return on investment over 90 days.

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

Verastem  vs.  Vyne Therapeutics

Verastem

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 11 (%) 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.

Vyne Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vyne Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Verastem and Vyne Therapeutics

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

The idea behind Verastem and Vyne 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.