Correlation Between Merck KGaA and Evotec SE
Can any of the company-specific risk be diversified away by investing in both Merck KGaA 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 Merck KGaA and Evotec SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA and Evotec SE, you can compare the effects of market volatilities on Merck KGaA 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 Merck KGaA with a short position of Evotec SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Evotec SE.
Diversification Opportunities for Merck KGaA and Evotec SE
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Evotec is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE and Merck KGaA 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 Merck KGaA 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 Merck KGaA i.e., Merck KGaA and Evotec SE go up and down completely randomly.
Pair Corralation between Merck KGaA and Evotec SE
Assuming the 90 days trading horizon Merck KGaA is expected to under-perform the Evotec SE. But the stock apears to be less risky and, when comparing its historical volatility, Merck KGaA is 6.73 times less risky than Evotec SE. The stock trades about -0.28 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 810.00 in Evotec SE on September 3, 2024 and sell it today you would earn a total of 73.00 from holding Evotec SE or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA vs. Evotec SE
Performance |
| Timeline |
| Merck KGaA |
| Evotec SE |
Merck KGaA and Evotec SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Evotec SE
The main advantage of trading using opposite Merck KGaA and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA 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.| Merck KGaA vs. Gol Intelligent Airlines | Merck KGaA vs. BJs Wholesale Club | Merck KGaA vs. Fast Retailing Co | Merck KGaA vs. JAPAN AIRLINES |
| Evotec SE vs. Merck KGaA | Evotec SE vs. CanSino Biologics | Evotec SE vs. Superior Plus Corp | Evotec SE vs. NMI Holdings |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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