Correlation Between Emergent Biosolutions and Eyepoint Pharmaceuticals

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

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

Diversification Opportunities for Emergent Biosolutions and Eyepoint Pharmaceuticals

0.51

Correlation Coefficient

Emergent Biosolutions  Eyepoint Pharmaceuticals

Very weak diversification

The 3 months correlation between Emergent and Eyepoint is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Biosolutions and Eyepoint Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyepoint Pharmaceuticals and Emergent Biosolutions 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 Emergent Biosolutions are associated (or correlated) with Eyepoint Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyepoint Pharmaceuticals has no effect on the direction of Emergent Biosolutions i.e., Emergent Biosolutions and Eyepoint Pharmaceuticals go up and down completely randomly.

Pair Corralation between Emergent Biosolutions and Eyepoint Pharmaceuticals

Considering the 90-day investment horizon Emergent Biosolutions is expected to generate 1.1 times more return on investment than Eyepoint Pharmaceuticals. However, Emergent Biosolutions is 1.1 times more volatile than Eyepoint Pharmaceuticals. It trades about 0.08 of its potential returns per unit of risk. Eyepoint Pharmaceuticals is currently generating about 0.0 per unit of risk. If you would invest  725.00  in Emergent Biosolutions on September 14, 2024 and sell it today you would earn a total of  144.00  from holding Emergent Biosolutions or generate 19.86% return on investment over 90 days.

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

Emergent Biosolutions  vs.  Eyepoint Pharmaceuticals

Emergent Biosolutions

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Eyepoint Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eyepoint Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eyepoint Pharmaceuticals is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Emergent Biosolutions and Eyepoint Pharmaceuticals

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

The idea behind Emergent Biosolutions and Eyepoint Pharmaceuticals 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.