Correlation Between Lyra Therapeutics and Evoke Pharma

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

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

Diversification Opportunities for Lyra Therapeutics and Evoke Pharma

0.62

Correlation Coefficient

Lyra Therapeutics  Evoke Pharma

Poor diversification

The 3 months correlation between Lyra and Evoke is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lyra Therapeutics and Evoke Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evoke Pharma and Lyra 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 Lyra Therapeutics are associated (or correlated) with Evoke Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evoke Pharma has no effect on the direction of Lyra Therapeutics i.e., Lyra Therapeutics and Evoke Pharma go up and down completely randomly.

Pair Corralation between Lyra Therapeutics and Evoke Pharma

Given the investment horizon of 90 days Lyra Therapeutics is expected to generate 1.12 times more return on investment than Evoke Pharma. However, Lyra Therapeutics is 1.12 times more volatile than Evoke Pharma. It trades about -0.03 of its potential returns per unit of risk. Evoke Pharma is currently generating about -0.06 per unit of risk. If you would invest  270.00  in Lyra Therapeutics on September 27, 2024 and sell it today you would lose (252.80) from holding Lyra Therapeutics or give up 93.63% of portfolio value over 90 days.

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

Lyra Therapeutics  vs.  Evoke Pharma

Lyra Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyra Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Evoke Pharma

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evoke Pharma are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Evoke Pharma disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyra Therapeutics and Evoke Pharma

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

The idea behind Lyra Therapeutics and Evoke 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.