Correlation Between Evelo Biosciences and Magenta Therapeutics

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

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

Diversification Opportunities for Evelo Biosciences and Magenta Therapeutics

0.46

Correlation Coefficient

Evelo Biosciences  Magenta Therapeutics

Very weak diversification

The 3 months correlation between Evelo and Magenta is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Evelo Biosciences and Magenta Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magenta Therapeutics and Evelo Biosciences 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 Evelo Biosciences are associated (or correlated) with Magenta Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magenta Therapeutics has no effect on the direction of Evelo Biosciences i.e., Evelo Biosciences and Magenta Therapeutics go up and down completely randomly.

Pair Corralation between Evelo Biosciences and Magenta Therapeutics

If you would invest  82.00  in Magenta Therapeutics on August 31, 2024 and sell it today you would earn a total of  0.00  from holding Magenta Therapeutics or generate 0.0% return on investment over 90 days.

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

Evelo Biosciences  vs.  Magenta Therapeutics

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.

Magenta Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magenta Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Magenta Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Evelo Biosciences and Magenta Therapeutics

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

The idea behind Evelo Biosciences and Magenta Therapeutics 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.