Correlation Between Surrozen and Evelo Biosciences

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

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

Diversification Opportunities for Surrozen and Evelo Biosciences

0.3

Correlation Coefficient

Surrozen  Evelo Biosciences

Weak diversification

The 3 months correlation between Surrozen and Evelo is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Surrozen and Evelo Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evelo Biosciences and Surrozen 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 Surrozen are associated (or correlated) with Evelo Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evelo Biosciences has no effect on the direction of Surrozen i.e., Surrozen and Evelo Biosciences go up and down completely randomly.

Pair Corralation between Surrozen and Evelo Biosciences

Given the investment horizon of 90 days Surrozen is expected to under-perform the Evelo Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Surrozen is 2.17 times less risky than Evelo Biosciences. The stock trades about 0.0 of its potential returns per unit of risk. The Evelo Biosciences is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,080  in Evelo Biosciences on July 22, 2024 and sell it today you would lose (3,257) from holding Evelo Biosciences or give up 79.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	36.9%
Values	Daily Returns

Surrozen  vs.  Evelo Biosciences

Surrozen

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Surrozen are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Surrozen displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Surrozen and Evelo Biosciences

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

The idea behind Surrozen and Evelo Biosciences 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.