Correlation Between Terns Pharmaceuticals and Evotec SE
Can any of the company-specific risk be diversified away by investing in both Terns Pharmaceuticals 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 Terns Pharmaceuticals and Evotec SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Terns Pharmaceuticals and Evotec SE ADR, you can compare the effects of market volatilities on Terns Pharmaceuticals 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 Terns Pharmaceuticals with a short position of Evotec SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terns Pharmaceuticals and Evotec SE.
Diversification Opportunities for Terns Pharmaceuticals and Evotec SE
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Terns and Evotec is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Terns Pharmaceuticals and Evotec SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE ADR and Terns Pharmaceuticals 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 Terns Pharmaceuticals 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 ADR has no effect on the direction of Terns Pharmaceuticals i.e., Terns Pharmaceuticals and Evotec SE go up and down completely randomly.
Pair Corralation between Terns Pharmaceuticals and Evotec SE
Given the investment horizon of 90 days Terns Pharmaceuticals is expected to under-perform the Evotec SE. But the stock apears to be less risky and, when comparing its historical volatility, Terns Pharmaceuticals is 2.17 times less risky than Evotec SE. The stock trades about -0.24 of its potential returns per unit of risk. The Evotec SE ADR is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 355.00 in Evotec SE ADR on August 24, 2024 and sell it today you would earn a total of 180.00 from holding Evotec SE ADR or generate 50.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Terns Pharmaceuticals vs. Evotec SE ADR
Performance |
| Timeline |
| Terns Pharmaceuticals |
| Evotec SE ADR |
Terns Pharmaceuticals and Evotec SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Terns Pharmaceuticals and Evotec SE
The main advantage of trading using opposite Terns Pharmaceuticals and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terns Pharmaceuticals 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.| Terns Pharmaceuticals vs. Lyra Therapeutics | Terns Pharmaceuticals vs. Hookipa Pharma | Terns Pharmaceuticals vs. Cingulate Warrants | Terns Pharmaceuticals vs. SAB Biotherapeutics |
| Evotec SE vs. Prestige Brand Holdings | Evotec SE vs. Supernus Pharmaceuticals | Evotec SE vs. Collegium Pharmaceutical | Evotec SE vs. ANI Pharmaceuticals |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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