Correlation Between Evoke Pharma and Catalent

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

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

Diversification Opportunities for Evoke Pharma and Catalent

-0.5

Correlation Coefficient

Evoke Pharma  Catalent

Very good diversification

The 3 months correlation between Evoke and Catalent is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Evoke Pharma and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Evoke Pharma i.e., Evoke Pharma and Catalent go up and down completely randomly.

Pair Corralation between Evoke Pharma and Catalent

Given the investment horizon of 90 days Evoke Pharma is expected to generate 9.73 times more return on investment than Catalent. However, Evoke Pharma is 9.73 times more volatile than Catalent. It trades about 0.03 of its potential returns per unit of risk. Catalent is currently generating about 0.14 per unit of risk. If you would invest  431.00  in Evoke Pharma on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Evoke Pharma or generate 0.23% return on investment over 90 days.

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

Evoke Pharma  vs.  Catalent

Evoke Pharma

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evoke Pharma are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Evoke Pharma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Catalent

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Evoke Pharma and Catalent

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

The idea behind Evoke Pharma and Catalent 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.