Correlation Between Verastem and Zymeworks Common

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

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

Diversification Opportunities for Verastem and Zymeworks Common

0.49

Correlation Coefficient

Verastem  Zymeworks Common

Very weak diversification

The 3 months correlation between Verastem and Zymeworks is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Zymeworks Common Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zymeworks Common Stock 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 Zymeworks Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zymeworks Common Stock has no effect on the direction of Verastem i.e., Verastem and Zymeworks Common go up and down completely randomly.

Pair Corralation between Verastem and Zymeworks Common

Given the investment horizon of 90 days Verastem is expected to under-perform the Zymeworks Common. But the stock apears to be less risky and, when comparing its historical volatility, Verastem is 1.25 times less risky than Zymeworks Common. The stock trades about -0.12 of its potential returns per unit of risk. The Zymeworks Common Stock is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,460  in Zymeworks Common Stock on December 2, 2024 and sell it today you would lose (120.00) from holding Zymeworks Common Stock or give up 8.22% of portfolio value over 90 days.

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

Verastem  vs.  Zymeworks Common Stock

Verastem

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 2 (%) 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.

Zymeworks Common Stock

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Verastem and Zymeworks Common

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

The idea behind Verastem and Zymeworks Common Stock 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.