Correlation Between US Physical and Evotec SE

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

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

Diversification Opportunities for US Physical and Evotec SE

0.83

Correlation Coefficient

US Physical  Evotec SE

Very poor diversification

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

Pair Corralation between US Physical and Evotec SE

Assuming the 90 days horizon US Physical Therapy is expected to generate 0.56 times more return on investment than Evotec SE. However, US Physical Therapy is 1.78 times less risky than Evotec SE. It trades about -0.21 of its potential returns per unit of risk. Evotec SE is currently generating about -0.14 per unit of risk. If you would invest  8,749  in US Physical Therapy on December 22, 2024 and sell it today you would lose (1,799) from holding US Physical Therapy or give up 20.56% of portfolio value over 90 days.

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

US Physical Therapy  vs.  Evotec SE

US Physical Therapy

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Physical Therapy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Evotec SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evotec SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with US Physical and Evotec SE

The main advantage of trading using opposite US Physical and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Physical 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 US Physical Therapy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.