Correlation Between Evoke Pharma and Cresco Labs

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

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

Diversification Opportunities for Evoke Pharma and Cresco Labs

0.1

Correlation Coefficient

Evoke Pharma  Cresco Labs

Average diversification

The 3 months correlation between Evoke and Cresco is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Evoke Pharma and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs 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 Cresco Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresco Labs has no effect on the direction of Evoke Pharma i.e., Evoke Pharma and Cresco Labs go up and down completely randomly.

Pair Corralation between Evoke Pharma and Cresco Labs

Given the investment horizon of 90 days Evoke Pharma is expected to under-perform the Cresco Labs. But the stock apears to be less risky and, when comparing its historical volatility, Evoke Pharma is 2.18 times less risky than Cresco Labs. The stock trades about -0.29 of its potential returns per unit of risk. The Cresco Labs is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Cresco Labs on September 5, 2024 and sell it today you would lose (40.00) from holding Cresco Labs or give up 26.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Evoke Pharma  vs.  Cresco Labs

Evoke Pharma

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evoke Pharma are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Evoke Pharma disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cresco Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cresco Labs 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 drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Evoke Pharma and Cresco Labs

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

The idea behind Evoke Pharma and Cresco Labs 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.