Correlation Between Terns Pharmaceuticals and Verastem

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

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

Diversification Opportunities for Terns Pharmaceuticals and Verastem

-0.56

Correlation Coefficient

Terns Pharmaceuticals  Verastem

Excellent diversification

The 3 months correlation between Terns and Verastem is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Terns Pharmaceuticals and Verastem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verastem and Terns 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 Terns Pharmaceuticals 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 Terns Pharmaceuticals i.e., Terns Pharmaceuticals and Verastem go up and down completely randomly.

Pair Corralation between Terns Pharmaceuticals and Verastem

Given the investment horizon of 90 days Terns Pharmaceuticals is expected to generate 0.78 times more return on investment than Verastem. However, Terns Pharmaceuticals is 1.27 times less risky than Verastem. It trades about 0.22 of its potential returns per unit of risk. Verastem is currently generating about -0.01 per unit of risk. If you would invest  330.00  in Terns Pharmaceuticals on May 3, 2025 and sell it today you would earn a total of  236.00  from holding Terns Pharmaceuticals or generate 71.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Terns Pharmaceuticals  vs.  Verastem

Terns Pharmaceuticals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Terns Pharmaceuticals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Terns Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Verastem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verastem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Verastem is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Terns Pharmaceuticals and Verastem

The main advantage of trading using opposite Terns Pharmaceuticals and Verastem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terns Pharmaceuticals 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 Terns Pharmaceuticals 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.