Correlation Between Evotec SE and SIMCERE PHARMAC

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

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

Diversification Opportunities for Evotec SE and SIMCERE PHARMAC

0.57

Correlation Coefficient

Evotec SE  SIMCERE PHARMAC

Very weak diversification

The 3 months correlation between Evotec and SIMCERE is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Evotec SE and SIMCERE PHARMAC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMCERE PHARMAC GRP 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 SIMCERE PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMCERE PHARMAC GRP has no effect on the direction of Evotec SE i.e., Evotec SE and SIMCERE PHARMAC go up and down completely randomly.

Pair Corralation between Evotec SE and SIMCERE PHARMAC

Assuming the 90 days trading horizon Evotec SE is expected to under-perform the SIMCERE PHARMAC. In addition to that, Evotec SE is 1.34 times more volatile than SIMCERE PHARMAC GRP. It trades about -0.02 of its total potential returns per unit of risk. SIMCERE PHARMAC GRP is currently generating about 0.02 per unit of volatility. If you would invest  78.00  in SIMCERE PHARMAC GRP on September 26, 2024 and sell it today you would earn a total of  3.00  from holding SIMCERE PHARMAC GRP or generate 3.85% return on investment over 90 days.

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

Evotec SE  vs.  SIMCERE PHARMAC GRP

Evotec SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evotec SE are ranked lower than 8 (%) 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.

SIMCERE PHARMAC GRP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIMCERE PHARMAC GRP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SIMCERE PHARMAC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evotec SE and SIMCERE PHARMAC

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

The idea behind Evotec SE and SIMCERE PHARMAC GRP 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.