Correlation Between Natural Health and Evotec SE

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

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

Diversification Opportunities for Natural Health and Evotec SE

-0.06

Correlation Coefficient

Natural Health  Evotec SE

Good diversification

The 3 months correlation between Natural and Evotec is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE and Natural Health 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 Natural Health Trends 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 Natural Health i.e., Natural Health and Evotec SE go up and down completely randomly.

Pair Corralation between Natural Health and Evotec SE

Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the Evotec SE. In addition to that, Natural Health is 1.38 times more volatile than Evotec SE. It trades about -0.12 of its total potential returns per unit of risk. Evotec SE is currently generating about -0.08 per unit of volatility. If you would invest  893.00  in Evotec SE on October 6, 2024 and sell it today you would lose (39.00) from holding Evotec SE or give up 4.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Natural Health Trends  vs.  Evotec SE

Natural Health Trends

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Health Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Evotec SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evotec SE are ranked lower than 9 (%) 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 Natural Health and Evotec SE

The main advantage of trading using opposite Natural Health and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health 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 Natural Health Trends 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .