Correlation Between Evoke Pharma and Quest Diagnostics

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

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

Diversification Opportunities for Evoke Pharma and Quest Diagnostics

-0.79

Correlation Coefficient

Evoke Pharma  Quest Diagnostics

Pay attention - limited upside

The 3 months correlation between Evoke and Quest is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Evoke Pharma and Quest Diagnostics Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quest Diagnostics and Evoke Pharma 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 Evoke Pharma are associated (or correlated) with Quest Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quest Diagnostics has no effect on the direction of Evoke Pharma i.e., Evoke Pharma and Quest Diagnostics go up and down completely randomly.

Pair Corralation between Evoke Pharma and Quest Diagnostics

Given the investment horizon of 90 days Evoke Pharma is expected to generate 6.55 times less return on investment than Quest Diagnostics. In addition to that, Evoke Pharma is 3.36 times more volatile than Quest Diagnostics Incorporated. It trades about 0.01 of its total potential returns per unit of risk. Quest Diagnostics Incorporated is currently generating about 0.22 per unit of volatility. If you would invest  12,864  in Quest Diagnostics Incorporated on February 15, 2024 and sell it today you would earn a total of  1,052  from holding Quest Diagnostics Incorporated or generate 8.18% return on investment over 90 days.

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

Evoke Pharma  vs.  Quest Diagnostics Incorporated

Evoke Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evoke Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Quest Diagnostics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quest Diagnostics Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Quest Diagnostics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Evoke Pharma and Quest Diagnostics

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

The idea behind Evoke Pharma and Quest Diagnostics Incorporated 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.