Correlation Between Evotec SE and X FAB

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

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

Diversification Opportunities for Evotec SE and X FAB

-0.65

Correlation Coefficient

Evotec SE  X FAB

Excellent diversification

The 3 months correlation between Evotec and XFB is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Evotec SE and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Evotec SE i.e., Evotec SE and X FAB go up and down completely randomly.

Pair Corralation between Evotec SE and X FAB

Assuming the 90 days trading horizon Evotec SE is expected to under-perform the X FAB. But the stock apears to be less risky and, when comparing its historical volatility, Evotec SE is 1.05 times less risky than X FAB. The stock trades about -0.08 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  424.00  in X FAB Silicon Foundries on October 4, 2024 and sell it today you would earn a total of  76.00  from holding X FAB Silicon Foundries or generate 17.92% return on investment over 90 days.

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

Evotec SE  vs.  X FAB Silicon Foundries

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 fragile basic indicators, Evotec SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, X FAB is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Evotec SE and X FAB

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

The idea behind Evotec SE and X FAB Silicon Foundries 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.