Correlation Between Avadel Pharmaceuticals and Evoke Pharma

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

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

Diversification Opportunities for Avadel Pharmaceuticals and Evoke Pharma

-0.13

Correlation Coefficient

Avadel Pharmaceuticals  Evoke Pharma

Good diversification

The 3 months correlation between Avadel and Evoke is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC and Evoke Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evoke Pharma and Avadel 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 Avadel Pharmaceuticals PLC are associated (or correlated) with Evoke Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evoke Pharma has no effect on the direction of Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and Evoke Pharma go up and down completely randomly.

Pair Corralation between Avadel Pharmaceuticals and Evoke Pharma

Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to generate 0.9 times more return on investment than Evoke Pharma. However, Avadel Pharmaceuticals PLC is 1.11 times less risky than Evoke Pharma. It trades about -0.07 of its potential returns per unit of risk. Evoke Pharma is currently generating about -0.14 per unit of risk. If you would invest  1,050  in Avadel Pharmaceuticals PLC on December 28, 2024 and sell it today you would lose (238.00) from holding Avadel Pharmaceuticals PLC or give up 22.67% of portfolio value over 90 days.

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

Avadel Pharmaceuticals PLC  vs.  Evoke Pharma

Avadel Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avadel Pharmaceuticals PLC 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 fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Evoke Pharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evoke Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Avadel Pharmaceuticals and Evoke Pharma

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

The idea behind Avadel Pharmaceuticals PLC and Evoke Pharma 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.