Correlation Between Esperion Therapeutics and Evotec SE

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

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

Diversification Opportunities for Esperion Therapeutics and Evotec SE

0.61

Correlation Coefficient

Esperion Therapeutics  Evotec SE

Poor diversification

The 3 months correlation between Esperion and Evotec is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics and Evotec SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE ADR and Esperion Therapeutics 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 Esperion Therapeutics 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 ADR has no effect on the direction of Esperion Therapeutics i.e., Esperion Therapeutics and Evotec SE go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Evotec SE

Given the investment horizon of 90 days Esperion Therapeutics is expected to under-perform the Evotec SE. In addition to that, Esperion Therapeutics is 1.2 times more volatile than Evotec SE ADR. It trades about -0.12 of its total potential returns per unit of risk. Evotec SE ADR is currently generating about -0.14 per unit of volatility. If you would invest  434.00  in Evotec SE ADR on December 29, 2024 and sell it today you would lose (103.00) from holding Evotec SE ADR or give up 23.73% of portfolio value over 90 days.

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

Esperion Therapeutics  vs.  Evotec SE ADR

Esperion Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esperion Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Evotec SE ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evotec SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Esperion Therapeutics and Evotec SE

The main advantage of trading using opposite Esperion Therapeutics and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Esperion Therapeutics 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 Esperion Therapeutics and Evotec SE ADR 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.

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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.