Correlation Between Sellas Life and Verastem

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

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

Diversification Opportunities for Sellas Life and Verastem

-0.52

Correlation Coefficient

Sellas Life  Verastem

Excellent diversification

The 3 months correlation between Sellas and Verastem is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sellas Life Sciences and Verastem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verastem and Sellas Life 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 Sellas Life Sciences are associated (or correlated) with Verastem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verastem has no effect on the direction of Sellas Life i.e., Sellas Life and Verastem go up and down completely randomly.

Pair Corralation between Sellas Life and Verastem

Considering the 90-day investment horizon Sellas Life is expected to generate 4.58 times less return on investment than Verastem. But when comparing it to its historical volatility, Sellas Life Sciences is 1.38 times less risky than Verastem. It trades about 0.01 of its potential returns per unit of risk. Verastem is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  459.00  in Verastem on August 13, 2024 and sell it today you would lose (64.00) from holding Verastem or give up 13.94% of portfolio value over 90 days.

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

Sellas Life Sciences  vs.  Verastem

Sellas Life Sciences

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sellas Life Sciences are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Sellas Life is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Verastem

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 12 (%) 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.

Pair Trading with Sellas Life and Verastem

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

The idea behind Sellas Life Sciences and Verastem 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.