Correlation Between Evotec SE and JD SPORTS

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

By analyzing existing cross correlation between Evotec SE and JD SPORTS FASH, you can compare the effects of market volatilities on Evotec SE and JD SPORTS 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 JD SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evotec SE and JD SPORTS.

Diversification Opportunities for Evotec SE and JD SPORTS

-0.81

Correlation Coefficient

Evotec SE  JD SPORTS

Pay attention - limited upside

The 3 months correlation between Evotec and 9JD is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Evotec SE and JD SPORTS FASH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD SPORTS FASH 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 are associated (or correlated) with JD SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD SPORTS FASH has no effect on the direction of Evotec SE i.e., Evotec SE and JD SPORTS go up and down completely randomly.

Pair Corralation between Evotec SE and JD SPORTS

Assuming the 90 days trading horizon Evotec SE is expected to generate 1.55 times more return on investment than JD SPORTS. However, Evotec SE is 1.55 times more volatile than JD SPORTS FASH. It trades about -0.03 of its potential returns per unit of risk. JD SPORTS FASH is currently generating about -0.04 per unit of risk. If you would invest  1,832  in Evotec SE on October 3, 2024 and sell it today you would lose (978.00) from holding Evotec SE or give up 53.38% of portfolio value over 90 days.

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

Evotec SE  vs.  JD SPORTS FASH

Evotec SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evotec SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Evotec SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

JD SPORTS FASH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD SPORTS FASH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Evotec SE and JD SPORTS

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

The idea behind Evotec SE and JD SPORTS FASH 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.