Correlation Between INDIKA ENERGY and Evotec SE

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

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

Diversification Opportunities for INDIKA ENERGY and Evotec SE

-0.83

Correlation Coefficient

INDIKA ENERGY  Evotec SE

Pay attention - limited upside

The 3 months correlation between INDIKA and Evotec is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding INDIKA ENERGY and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE and INDIKA ENERGY 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 INDIKA ENERGY 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 INDIKA ENERGY i.e., INDIKA ENERGY and Evotec SE go up and down completely randomly.

Pair Corralation between INDIKA ENERGY and Evotec SE

Assuming the 90 days trading horizon INDIKA ENERGY is expected to generate 1.68 times more return on investment than Evotec SE. However, INDIKA ENERGY is 1.68 times more volatile than Evotec SE. It trades about 0.28 of its potential returns per unit of risk. Evotec SE is currently generating about -0.1 per unit of risk. If you would invest  7.35  in INDIKA ENERGY on October 15, 2024 and sell it today you would earn a total of  1.35  from holding INDIKA ENERGY or generate 18.37% return on investment over 90 days.

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

INDIKA ENERGY  vs.  Evotec SE

INDIKA ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

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

Evotec SE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evotec SE are ranked lower than 12 (%) 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 INDIKA ENERGY and Evotec SE

The main advantage of trading using opposite INDIKA ENERGY and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDIKA ENERGY 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 INDIKA ENERGY 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.