Correlation Between Bitcoin and Evolution Petroleum

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

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

Diversification Opportunities for Bitcoin and Evolution Petroleum

0.74

Correlation Coefficient

Bitcoin  Evolution Petroleum

Poor diversification

The 3 months correlation between Bitcoin and Evolution is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Bitcoin 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 Bitcoin are associated (or correlated) with Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of Bitcoin i.e., Bitcoin and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Bitcoin and Evolution Petroleum

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.56 times more return on investment than Evolution Petroleum. However, Bitcoin is 1.56 times more volatile than Evolution Petroleum. It trades about 0.24 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.11 per unit of risk. If you would invest  6,657,777  in Bitcoin on October 24, 2024 and sell it today you would earn a total of  3,935,023  from holding Bitcoin or generate 59.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Bitcoin  vs.  Evolution Petroleum

Bitcoin

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Evolution Petroleum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Evolution Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin and Evolution Petroleum

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

The idea behind Bitcoin and Evolution Petroleum 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.