Correlation Between Ford and Evotec SE

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

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

Diversification Opportunities for Ford and Evotec SE

0.11

Correlation Coefficient

Ford  Evotec SE

Average diversification

The 3 months correlation between Ford and Evotec is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE and Ford 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 Ford Motor are associated (or correlated) with Evotec SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evotec SE has no effect on the direction of Ford i.e., Ford and Evotec SE go up and down completely randomly.

Pair Corralation between Ford and Evotec SE

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Evotec SE. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 3.17 times less risky than Evotec SE. The stock trades about -0.1 of its potential returns per unit of risk. The Evotec SE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  706.00  in Evotec SE on September 27, 2024 and sell it today you would earn a total of  135.00  from holding Evotec SE or generate 19.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Ford Motor  vs.  Evotec SE

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Ford and Evotec SE

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

The idea behind Ford Motor and Evotec SE 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.