Correlation Between Phibro Animal and Evoke Pharma

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

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

Diversification Opportunities for Phibro Animal and Evoke Pharma

0.25

Correlation Coefficient

Phibro Animal  Evoke Pharma

Modest diversification

The 3 months correlation between Phibro and Evoke is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Evoke Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evoke Pharma and Phibro Animal 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 Phibro Animal Health 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 Phibro Animal i.e., Phibro Animal and Evoke Pharma go up and down completely randomly.

Pair Corralation between Phibro Animal and Evoke Pharma

Given the investment horizon of 90 days Phibro Animal Health is expected to generate 0.57 times more return on investment than Evoke Pharma. However, Phibro Animal Health is 1.75 times less risky than Evoke Pharma. It trades about 0.07 of its potential returns per unit of risk. Evoke Pharma is currently generating about -0.02 per unit of risk. If you would invest  1,223  in Phibro Animal Health on December 2, 2024 and sell it today you would earn a total of  1,051  from holding Phibro Animal Health or generate 85.94% return on investment over 90 days.

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

Phibro Animal Health  vs.  Evoke Pharma

Phibro Animal Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Phibro Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Phibro Animal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Evoke Pharma

Risk-Adjusted Performance

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 inconsistent basic indicators, Evoke Pharma disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phibro Animal and Evoke Pharma

The main advantage of trading using opposite Phibro Animal and Evoke Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phibro Animal 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 Phibro Animal Health 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 Transaction History module to view history of all your transactions and understand their impact on performance.