Correlation Between Evolus and Editas Medicine

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

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

Diversification Opportunities for Evolus and Editas Medicine

0.89

Correlation Coefficient

Evolus  Editas Medicine

Very poor diversification

The 3 months correlation between Evolus and Editas is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Evolus Inc and Editas Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Editas Medicine and Evolus 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 Evolus Inc are associated (or correlated) with Editas Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Editas Medicine has no effect on the direction of Evolus i.e., Evolus and Editas Medicine go up and down completely randomly.

Pair Corralation between Evolus and Editas Medicine

Given the investment horizon of 90 days Evolus Inc is expected to generate 0.92 times more return on investment than Editas Medicine. However, Evolus Inc is 1.09 times less risky than Editas Medicine. It trades about -0.03 of its potential returns per unit of risk. Editas Medicine is currently generating about -0.3 per unit of risk. If you would invest  1,358  in Evolus Inc on February 3, 2024 and sell it today you would lose (36.00) from holding Evolus Inc or give up 2.65% of portfolio value over 90 days.

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

Evolus Inc  vs.  Editas Medicine

Evolus Inc

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolus Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Evolus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Editas Medicine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Editas Medicine 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 Stock's forward indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Evolus and Editas Medicine

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

The idea behind Evolus Inc and Editas Medicine 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.