Correlation Between Bicycle Therapeutics and Evelo Biosciences

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

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

Diversification Opportunities for Bicycle Therapeutics and Evelo Biosciences

-0.48

Correlation Coefficient

Bicycle Therapeutics  Evelo Biosciences

Very good diversification

The 3 months correlation between Bicycle and Evelo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bicycle Therapeutics and Evelo Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evelo Biosciences and Bicycle Therapeutics 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 Bicycle Therapeutics are associated (or correlated) with Evelo Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evelo Biosciences has no effect on the direction of Bicycle Therapeutics i.e., Bicycle Therapeutics and Evelo Biosciences go up and down completely randomly.

Pair Corralation between Bicycle Therapeutics and Evelo Biosciences

If you would invest  823.00  in Evelo Biosciences on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Evelo Biosciences or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	5.0%
Values	Daily Returns

Bicycle Therapeutics  vs.  Evelo Biosciences

Bicycle Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bicycle Therapeutics 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 basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Evelo Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bicycle Therapeutics and Evelo Biosciences

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

The idea behind Bicycle Therapeutics and Evelo Biosciences 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.