Correlation Between ESSA Pharma and Portage Biotech

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

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

Diversification Opportunities for ESSA Pharma and Portage Biotech

0.9

Correlation Coefficient

ESSA Pharma  Portage Biotech

Almost no diversification

The 3 months correlation between ESSA and Portage is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and Portage Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portage Biotech and ESSA Pharma 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 ESSA Pharma are associated (or correlated) with Portage Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portage Biotech has no effect on the direction of ESSA Pharma i.e., ESSA Pharma and Portage Biotech go up and down completely randomly.

Pair Corralation between ESSA Pharma and Portage Biotech

Given the investment horizon of 90 days ESSA Pharma is expected to generate 0.39 times more return on investment than Portage Biotech. However, ESSA Pharma is 2.58 times less risky than Portage Biotech. It trades about -0.09 of its potential returns per unit of risk. Portage Biotech is currently generating about -0.09 per unit of risk. If you would invest  788.00  in ESSA Pharma on February 23, 2024 and sell it today you would lose (175.00) from holding ESSA Pharma or give up 22.21% of portfolio value over 90 days.

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

ESSA Pharma  vs.  Portage Biotech

ESSA Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSA Pharma 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 forward indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Portage Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portage Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ESSA Pharma and Portage Biotech

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

The idea behind ESSA Pharma and Portage Biotech 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.