Correlation Between Data Modul and Evotec SE

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

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

Diversification Opportunities for Data Modul and Evotec SE

0.59

Correlation Coefficient

Data Modul  Evotec SE

Very weak diversification

The 3 months correlation between Data and Evotec is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Data Modul AG and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE and Data Modul 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 Data Modul AG are associated (or correlated) with Evotec SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evotec SE has no effect on the direction of Data Modul i.e., Data Modul and Evotec SE go up and down completely randomly.

Pair Corralation between Data Modul and Evotec SE

Assuming the 90 days trading horizon Data Modul AG is expected to under-perform the Evotec SE. But the stock apears to be less risky and, when comparing its historical volatility, Data Modul AG is 1.29 times less risky than Evotec SE. The stock trades about -0.09 of its potential returns per unit of risk. The Evotec SE is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  885.00  in Evotec SE on October 8, 2024 and sell it today you would lose (31.00) from holding Evotec SE or give up 3.5% of portfolio value over 90 days.

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

Data Modul AG  vs.  Evotec SE

Data Modul AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Data Modul AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Data Modul is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Evotec SE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evotec SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Evotec SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Modul and Evotec SE

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

The idea behind Data Modul AG and Evotec SE 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.