Correlation Between Barings BDC and Evolution Gaming

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

By analyzing existing cross correlation between Barings BDC and Evolution Gaming Group, you can compare the effects of market volatilities on Barings BDC and Evolution Gaming 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 Barings BDC with a short position of Evolution Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings BDC and Evolution Gaming.

Diversification Opportunities for Barings BDC and Evolution Gaming

-0.42

Correlation Coefficient

Barings BDC  Evolution Gaming

Very good diversification

The 3 months correlation between Barings and Evolution is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Evolution Gaming Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Gaming and Barings BDC 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 Barings BDC are associated (or correlated) with Evolution Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Gaming has no effect on the direction of Barings BDC i.e., Barings BDC and Evolution Gaming go up and down completely randomly.

Pair Corralation between Barings BDC and Evolution Gaming

Given the investment horizon of 90 days Barings BDC is expected to generate 0.58 times more return on investment than Evolution Gaming. However, Barings BDC is 1.71 times less risky than Evolution Gaming. It trades about 0.07 of its potential returns per unit of risk. Evolution Gaming Group is currently generating about -0.03 per unit of risk. If you would invest  691.00  in Barings BDC on September 17, 2024 and sell it today you would earn a total of  270.50  from holding Barings BDC or generate 39.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.78%
Values	Daily Returns

Barings BDC  vs.  Evolution Gaming Group

Barings BDC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Evolution Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Gaming Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Barings BDC and Evolution Gaming

The main advantage of trading using opposite Barings BDC and Evolution Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC position performs unexpectedly, Evolution Gaming 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 Evolution Gaming will offset losses from the drop in Evolution Gaming's long position.

The idea behind Barings BDC and Evolution Gaming Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.