Correlation Between Evolution and Sankyo Co

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

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

Diversification Opportunities for Evolution and Sankyo Co

-0.16

Correlation Coefficient

Evolution  Sankyo Co

Good diversification

The 3 months correlation between Evolution and Sankyo is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Sankyo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sankyo Co 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 Sankyo Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sankyo Co has no effect on the direction of Evolution i.e., Evolution and Sankyo Co go up and down completely randomly.

Pair Corralation between Evolution and Sankyo Co

Assuming the 90 days trading horizon Evolution is expected to generate 23.86 times less return on investment than Sankyo Co. In addition to that, Evolution is 1.05 times more volatile than Sankyo Co. It trades about 0.0 of its total potential returns per unit of risk. Sankyo Co is currently generating about 0.06 per unit of volatility. If you would invest  1,270  in Sankyo Co on December 28, 2024 and sell it today you would earn a total of  80.00  from holding Sankyo Co or generate 6.3% return on investment over 90 days.

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

Evolution AB  vs.  Sankyo Co

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.

Sankyo Co

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sankyo Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sankyo Co may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Evolution and Sankyo Co

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

The idea behind Evolution AB and Sankyo Co 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.