Correlation Between Evotec SE and Phibro Animal

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

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

Diversification Opportunities for Evotec SE and Phibro Animal

0.19

Correlation Coefficient

Evotec SE  Phibro Animal

Average diversification

The 3 months correlation between Evotec and Phibro is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Evotec SE ADR and Phibro Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phibro Animal Health and Evotec SE 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 Evotec SE ADR are associated (or correlated) with Phibro Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phibro Animal Health has no effect on the direction of Evotec SE i.e., Evotec SE and Phibro Animal go up and down completely randomly.

Pair Corralation between Evotec SE and Phibro Animal

Considering the 90-day investment horizon Evotec SE ADR is expected to under-perform the Phibro Animal. But the stock apears to be less risky and, when comparing its historical volatility, Evotec SE ADR is 1.1 times less risky than Phibro Animal. The stock trades about -0.12 of its potential returns per unit of risk. The Phibro Animal Health is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,087  in Phibro Animal Health on December 28, 2024 and sell it today you would earn a total of  81.00  from holding Phibro Animal Health or generate 3.88% return on investment over 90 days.

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

Evotec SE ADR  vs.  Phibro Animal Health

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.

Phibro Animal Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Phibro Animal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Evotec SE and Phibro Animal

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

The idea behind Evotec SE ADR and Phibro Animal Health 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.