Correlation Between Zenas BioPharma, and Evelo Biosciences

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

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

Diversification Opportunities for Zenas BioPharma, and Evelo Biosciences

-0.42

Correlation Coefficient

Zenas BioPharma,  Evelo Biosciences

Very good diversification

The 3 months correlation between Zenas and Evelo is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Zenas BioPharma, Common and Evelo Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evelo Biosciences and Zenas BioPharma, 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 Zenas BioPharma, Common are associated (or correlated) with Evelo Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evelo Biosciences has no effect on the direction of Zenas BioPharma, i.e., Zenas BioPharma, and Evelo Biosciences go up and down completely randomly.

Pair Corralation between Zenas BioPharma, and Evelo Biosciences

Given the investment horizon of 90 days Zenas BioPharma, Common is expected to under-perform the Evelo Biosciences. But the etf apears to be less risky and, when comparing its historical volatility, Zenas BioPharma, Common is 2.85 times less risky than Evelo Biosciences. The etf trades about -0.15 of its potential returns per unit of risk. The Evelo Biosciences is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,720  in Evelo Biosciences on October 3, 2024 and sell it today you would lose (1,897) from holding Evelo Biosciences or give up 69.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	57.14%
Values	Daily Returns

Zenas BioPharma, Common  vs.  Evelo Biosciences

Zenas BioPharma, Common

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zenas BioPharma, Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Evelo Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evelo Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Evelo Biosciences is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Zenas BioPharma, and Evelo Biosciences

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

The idea behind Zenas BioPharma, Common and Evelo Biosciences 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.