Correlation Between Evoke Pharma and BridgeBio Pharma

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

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

Diversification Opportunities for Evoke Pharma and BridgeBio Pharma

-0.36

Correlation Coefficient

Evoke Pharma  BridgeBio Pharma

Very good diversification

The 3 months correlation between Evoke and BridgeBio is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Evoke Pharma and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio Pharma and Evoke Pharma 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 Evoke Pharma are associated (or correlated) with BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of Evoke Pharma i.e., Evoke Pharma and BridgeBio Pharma go up and down completely randomly.

Pair Corralation between Evoke Pharma and BridgeBio Pharma

Given the investment horizon of 90 days Evoke Pharma is expected to generate 20.26 times less return on investment than BridgeBio Pharma. In addition to that, Evoke Pharma is 1.91 times more volatile than BridgeBio Pharma. It trades about 0.0 of its total potential returns per unit of risk. BridgeBio Pharma is currently generating about 0.11 per unit of volatility. If you would invest  2,338  in BridgeBio Pharma on October 9, 2024 and sell it today you would earn a total of  508.00  from holding BridgeBio Pharma or generate 21.73% return on investment over 90 days.

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

Evoke Pharma  vs.  BridgeBio Pharma

Evoke Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evoke Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Evoke Pharma is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

BridgeBio Pharma

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BridgeBio Pharma are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, BridgeBio Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evoke Pharma and BridgeBio Pharma

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

The idea behind Evoke Pharma and BridgeBio 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.