Correlation Between Takeda Pharmaceutical and Evotec SE

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

Diversification Opportunities for Takeda Pharmaceutical and Evotec SE

0.58

Correlation Coefficient

Takeda Pharmaceutical  Evotec SE

Very weak diversification

The 3 months correlation between Takeda and Evotec is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Takeda Pharmaceutical Co and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE and Takeda 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 Takeda Pharmaceutical Co 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 Takeda Pharmaceutical i.e., Takeda Pharmaceutical and Evotec SE go up and down completely randomly.

Pair Corralation between Takeda Pharmaceutical and Evotec SE

Assuming the 90 days horizon Takeda Pharmaceutical Co is expected to generate 0.74 times more return on investment than Evotec SE. However, Takeda Pharmaceutical Co is 1.35 times less risky than Evotec SE. It trades about -0.01 of its potential returns per unit of risk. Evotec SE is currently generating about -0.06 per unit of risk. If you would invest  3,204  in Takeda Pharmaceutical Co on February 16, 2024 and sell it today you would lose (540.00) from holding Takeda Pharmaceutical Co or give up 16.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Takeda Pharmaceutical Co  vs.  Evotec SE

Takeda Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Takeda Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Takeda Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Evotec SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evotec SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Takeda Pharmaceutical and Evotec SE

The main advantage of trading using opposite Takeda Pharmaceutical and Evotec SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Takeda 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 Takeda Pharmaceutical Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.