Correlation Between Visa and Evotec SE

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

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

Diversification Opportunities for Visa and Evotec SE

0.87

Correlation Coefficient

Visa  Evotec SE

Very poor diversification

The 3 months correlation between Visa and Evotec is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE and Visa 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 Visa Class A 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 Visa i.e., Visa and Evotec SE go up and down completely randomly.

Pair Corralation between Visa and Evotec SE

Taking into account the 90-day investment horizon Visa is expected to generate 2.21 times less return on investment than Evotec SE. But when comparing it to its historical volatility, Visa Class A is 6.01 times less risky than Evotec SE. It trades about 0.25 of its potential returns per unit of risk. 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	Strong
Accuracy	97.67%
Values	Daily Returns

Visa Class A  vs.  Evotec SE

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

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 Visa and Evotec SE

The main advantage of trading using opposite Visa and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.