Correlation Between Deciphera Pharmaceuticals and Evotec SE

Can any of the company-specific risk be diversified away by investing in both Deciphera 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 Deciphera 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 Deciphera Pharmaceuticals LLC and Evotec SE ADR, you can compare the effects of market volatilities on Deciphera 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 Deciphera Pharmaceuticals with a short position of Evotec SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deciphera Pharmaceuticals and Evotec SE.

Diversification Opportunities for Deciphera Pharmaceuticals and Evotec SE

-0.26

Correlation Coefficient

Deciphera Pharmaceuticals  Evotec SE

Very good diversification

The 3 months correlation between Deciphera and Evotec is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Deciphera Pharmaceuticals LLC 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 Deciphera 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 Deciphera Pharmaceuticals LLC 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 Deciphera Pharmaceuticals i.e., Deciphera Pharmaceuticals and Evotec SE go up and down completely randomly.

Pair Corralation between Deciphera Pharmaceuticals and Evotec SE

If you would invest  345.00  in Evotec SE ADR on September 2, 2024 and sell it today you would earn a total of  124.00  from holding Evotec SE ADR or generate 35.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Deciphera Pharmaceuticals LLC  vs.  Evotec SE ADR

Deciphera Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deciphera Pharmaceuticals LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Deciphera Pharmaceuticals is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Evotec SE ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evotec SE ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Evotec SE displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deciphera Pharmaceuticals and Evotec SE

The main advantage of trading using opposite Deciphera Pharmaceuticals and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deciphera 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.

The idea behind Deciphera Pharmaceuticals LLC and Evotec SE ADR 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.