Correlation Between Teva Pharmaceutical and Evotec SE

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

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

Diversification Opportunities for Teva Pharmaceutical and Evotec SE

-0.34

Correlation Coefficient

Teva Pharmaceutical  Evotec SE

Very good diversification

The 3 months correlation between Teva and Evotec is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE and Teva Pharmaceutical 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 Teva Pharmaceutical Industries 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 Teva Pharmaceutical i.e., Teva Pharmaceutical and Evotec SE go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and Evotec SE

Assuming the 90 days trading horizon Teva Pharmaceutical Industries is expected to under-perform the Evotec SE. But the stock apears to be less risky and, when comparing its historical volatility, Teva Pharmaceutical Industries is 2.71 times less risky than Evotec SE. The stock trades about -0.09 of its potential returns per unit of risk. The Evotec SE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  710.00  in Evotec SE on September 13, 2024 and sell it today you would earn a total of  224.00  from holding Evotec SE or generate 31.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.88%
Values	Daily Returns

Teva Pharmaceutical Industries  vs.  Evotec SE

Teva Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teva Pharmaceutical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. Despite nearly weak basic indicators, Evotec SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teva Pharmaceutical and Evotec SE

The main advantage of trading using opposite Teva Pharmaceutical and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teva Pharmaceutical 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 Teva Pharmaceutical Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.