Correlation Between Better Collective and Evolution

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

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

Diversification Opportunities for Better Collective and Evolution

0.73

Correlation Coefficient

Better Collective  Evolution

Poor diversification

The 3 months correlation between Better and Evolution is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Better Collective and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and Better Collective 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 Better Collective are associated (or correlated) with Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution AB has no effect on the direction of Better Collective i.e., Better Collective and Evolution go up and down completely randomly.

Pair Corralation between Better Collective and Evolution

Assuming the 90 days trading horizon Better Collective is expected to generate 1.13 times more return on investment than Evolution. However, Better Collective is 1.13 times more volatile than Evolution AB. It trades about -0.06 of its potential returns per unit of risk. Evolution AB is currently generating about -0.09 per unit of risk. If you would invest  12,320  in Better Collective on December 1, 2024 and sell it today you would lose (1,300) from holding Better Collective or give up 10.55% of portfolio value over 90 days.

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

Better Collective  vs.  Evolution AB

Better Collective

Risk-Adjusted Performance

Very Weak

Over the last 90 days Better Collective has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Evolution AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolution AB 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Better Collective and Evolution

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

The idea behind Better Collective and Evolution AB 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.