Correlation Between Evolution and FUTURE GAMING

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

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

Diversification Opportunities for Evolution and FUTURE GAMING

0.3

Correlation Coefficient

Evolution  FUTURE GAMING

Weak diversification

The 3 months correlation between Evolution and FUTURE is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and FUTURE GAMING GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUTURE GAMING GRP and Evolution 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 Evolution AB are associated (or correlated) with FUTURE GAMING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUTURE GAMING GRP has no effect on the direction of Evolution i.e., Evolution and FUTURE GAMING go up and down completely randomly.

Pair Corralation between Evolution and FUTURE GAMING

Assuming the 90 days trading horizon Evolution AB is expected to generate 0.63 times more return on investment than FUTURE GAMING. However, Evolution AB is 1.6 times less risky than FUTURE GAMING. It trades about -0.01 of its potential returns per unit of risk. FUTURE GAMING GRP is currently generating about -0.01 per unit of risk. If you would invest  7,454  in Evolution AB on December 28, 2024 and sell it today you would lose (250.00) from holding Evolution AB or give up 3.35% of portfolio value over 90 days.

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

Evolution AB  vs.  FUTURE GAMING GRP

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. Despite nearly stable technical and fundamental indicators, Evolution is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

FUTURE GAMING GRP

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Evolution and FUTURE GAMING

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

The idea behind Evolution AB and FUTURE GAMING GRP 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.