Correlation Between Viatris and Evotec SE

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

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

Diversification Opportunities for Viatris and Evotec SE

0.83

Correlation Coefficient

Viatris  Evotec SE

Very poor diversification

The 3 months correlation between Viatris and Evotec is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Viatris 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 Viatris 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 Viatris 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 Viatris i.e., Viatris and Evotec SE go up and down completely randomly.

Pair Corralation between Viatris and Evotec SE

Given the investment horizon of 90 days Viatris is expected to generate 3.66 times less return on investment than Evotec SE. But when comparing it to its historical volatility, Viatris is 2.5 times less risky than Evotec SE. It trades about 0.08 of its potential returns per unit of risk. Evotec SE ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  345.00  in Evotec SE ADR on September 3, 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Viatris  vs.  Evotec SE ADR

Viatris

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Viatris may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 inconsistent basic indicators, Evotec SE displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Viatris and Evotec SE

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

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.