Correlation Between Evogene and Purple Biotech

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

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

Diversification Opportunities for Evogene and Purple Biotech

0.79

Correlation Coefficient

Evogene  Purple Biotech

Poor diversification

The 3 months correlation between Evogene and Purple is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Evogene and Purple Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purple Biotech and Evogene 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 Evogene are associated (or correlated) with Purple Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purple Biotech has no effect on the direction of Evogene i.e., Evogene and Purple Biotech go up and down completely randomly.

Pair Corralation between Evogene and Purple Biotech

Assuming the 90 days trading horizon Evogene is expected to under-perform the Purple Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Evogene is 3.2 times less risky than Purple Biotech. The stock trades about -0.29 of its potential returns per unit of risk. The Purple Biotech is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Purple Biotech on September 13, 2024 and sell it today you would lose (680.00) from holding Purple Biotech or give up 48.57% of portfolio value over 90 days.

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

Evogene  vs.  Purple Biotech

Evogene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evogene 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Purple Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Purple Biotech 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Evogene and Purple Biotech

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

The idea behind Evogene and Purple Biotech 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.