Correlation Between Evogene and Compugen
Can any of the company-specific risk be diversified away by investing in both Evogene and Compugen 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 Evogene and Compugen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evogene and Compugen, you can compare the effects of market volatilities on Evogene and Compugen 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 Evogene with a short position of Compugen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evogene and Compugen.
Diversification Opportunities for Evogene and Compugen
Poor diversification
The 3 months correlation between Evogene and Compugen is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Evogene and Compugen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compugen and Evogene 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 Evogene are associated (or correlated) with Compugen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compugen has no effect on the direction of Evogene i.e., Evogene and Compugen go up and down completely randomly.
Pair Corralation between Evogene and Compugen
Assuming the 90 days trading horizon Evogene is expected to generate 1.1 times more return on investment than Compugen. However, Evogene is 1.1 times more volatile than Compugen. It trades about -0.1 of its potential returns per unit of risk. Compugen is currently generating about -0.34 per unit of risk. If you would invest 27,370 in Evogene on January 27, 2024 and sell it today you would lose (1,750) from holding Evogene or give up 6.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.12% |
| Values | Daily Returns |
Evogene vs. Compugen
Performance |
| Timeline |
| Evogene |
| Compugen |
Evogene and Compugen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evogene and Compugen
The main advantage of trading using opposite Evogene and Compugen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evogene position performs unexpectedly, Compugen 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 Compugen will offset losses from the drop in Compugen's long position.The idea behind Evogene and Compugen 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.Check out your portfolio center.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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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