Correlation Between Erasca and Tarsus Pharmaceuticals

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

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

Diversification Opportunities for Erasca and Tarsus Pharmaceuticals

-0.08

Correlation Coefficient

Erasca  Tarsus Pharmaceuticals

Good diversification

The 3 months correlation between Erasca and Tarsus is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Erasca Inc and Tarsus Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarsus Pharmaceuticals and Erasca 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 Erasca Inc are associated (or correlated) with Tarsus Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarsus Pharmaceuticals has no effect on the direction of Erasca i.e., Erasca and Tarsus Pharmaceuticals go up and down completely randomly.

Pair Corralation between Erasca and Tarsus Pharmaceuticals

Given the investment horizon of 90 days Erasca Inc is expected to generate 1.14 times more return on investment than Tarsus Pharmaceuticals. However, Erasca is 1.14 times more volatile than Tarsus Pharmaceuticals. It trades about 0.06 of its potential returns per unit of risk. Tarsus Pharmaceuticals is currently generating about 0.06 per unit of risk. If you would invest  221.00  in Erasca Inc on August 2, 2024 and sell it today you would earn a total of  49.00  from holding Erasca Inc or generate 22.17% return on investment over 90 days.

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

Erasca Inc  vs.  Tarsus Pharmaceuticals

Erasca Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erasca Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Erasca is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Tarsus Pharmaceuticals

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tarsus Pharmaceuticals are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Tarsus Pharmaceuticals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erasca and Tarsus Pharmaceuticals

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

The idea behind Erasca Inc and Tarsus Pharmaceuticals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.