Correlation Between Evolution and Scientific Games

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

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

Diversification Opportunities for Evolution and Scientific Games

-0.02

Correlation Coefficient

Evolution  Scientific Games

Good diversification

The 3 months correlation between Evolution and Scientific is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games 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 Scientific Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games has no effect on the direction of Evolution i.e., Evolution and Scientific Games go up and down completely randomly.

Pair Corralation between Evolution and Scientific Games

Assuming the 90 days trading horizon Evolution AB is expected to under-perform the Scientific Games. But the stock apears to be less risky and, when comparing its historical volatility, Evolution AB is 1.16 times less risky than Scientific Games. The stock trades about -0.08 of its potential returns per unit of risk. The Scientific Games is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,500  in Scientific Games on October 2, 2024 and sell it today you would earn a total of  750.00  from holding Scientific Games or generate 10.0% 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.  Scientific Games

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Scientific Games

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scientific Games are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Scientific Games may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Evolution and Scientific Games

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

The idea behind Evolution AB and Scientific Games 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.