Correlation Between Verrica Pharmaceuticals and Arcturus Therapeutics

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

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

Diversification Opportunities for Verrica Pharmaceuticals and Arcturus Therapeutics

-0.45

Correlation Coefficient

Verrica Pharmaceuticals  Arcturus Therapeutics

Very good diversification

The 3 months correlation between Verrica and Arcturus is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Verrica Pharmaceuticals and Arcturus Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcturus Therapeutics and Verrica Pharmaceuticals 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 Verrica Pharmaceuticals are associated (or correlated) with Arcturus Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcturus Therapeutics has no effect on the direction of Verrica Pharmaceuticals i.e., Verrica Pharmaceuticals and Arcturus Therapeutics go up and down completely randomly.

Pair Corralation between Verrica Pharmaceuticals and Arcturus Therapeutics

Given the investment horizon of 90 days Verrica Pharmaceuticals is expected to generate 0.78 times more return on investment than Arcturus Therapeutics. However, Verrica Pharmaceuticals is 1.27 times less risky than Arcturus Therapeutics. It trades about 0.19 of its potential returns per unit of risk. Arcturus Therapeutics Holdings is currently generating about 0.03 per unit of risk. If you would invest  555.00  in Verrica Pharmaceuticals on March 3, 2024 and sell it today you would earn a total of  296.00  from holding Verrica Pharmaceuticals or generate 53.33% return on investment over 90 days.

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

Verrica Pharmaceuticals  vs.  Arcturus Therapeutics Holdings

Verrica Pharmaceuticals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verrica Pharmaceuticals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Verrica Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Arcturus Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arcturus Therapeutics Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Arcturus Therapeutics may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Verrica Pharmaceuticals and Arcturus Therapeutics

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

The idea behind Verrica Pharmaceuticals and Arcturus Therapeutics Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.