Correlation Between Evotec SE and H2O Retailing

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Can any of the company-specific risk be diversified away by investing in both Evotec SE and H2O Retailing 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 H2O Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evotec SE and H2O Retailing, you can compare the effects of market volatilities on Evotec SE and H2O Retailing 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 H2O Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evotec SE and H2O Retailing.

Diversification Opportunities for Evotec SE and H2O Retailing

EvotecH2ODiversified AwayEvotecH2ODiversified Away100%
-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Evotec and H2O is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Evotec SE and H2O Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H2O Retailing 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 H2O Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H2O Retailing has no effect on the direction of Evotec SE i.e., Evotec SE and H2O Retailing go up and down completely randomly.

Pair Corralation between Evotec SE and H2O Retailing

Assuming the 90 days trading horizon Evotec SE is expected to under-perform the H2O Retailing. In addition to that, Evotec SE is 2.15 times more volatile than H2O Retailing. It trades about -0.03 of its total potential returns per unit of risk. H2O Retailing is currently generating about 0.15 per unit of volatility. If you would invest  1,240  in H2O Retailing on November 19, 2024 and sell it today you would earn a total of  190.00  from holding H2O Retailing or generate 15.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Evotec SE  vs.  H2O Retailing

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0102030
JavaScript chart by amCharts 3.21.15EVT HKU
       Timeline  
Evotec SE 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Evotec SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Evotec SE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb88.599.51010.5
H2O Retailing 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in H2O Retailing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, H2O Retailing reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb12.51313.514

Evotec SE and H2O Retailing Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-15.87-11.89-7.9-3.920.06854.048.1612.2716.38 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15EVT HKU
       Returns  

Pair Trading with Evotec SE and H2O Retailing

The main advantage of trading using opposite Evotec SE and H2O Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evotec SE position performs unexpectedly, H2O Retailing 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 H2O Retailing will offset losses from the drop in H2O Retailing's long position.
The idea behind Evotec SE and H2O Retailing 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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