Correlation Between Evolution and Good Gaming

Can any of the company-specific risk be diversified away by investing in both Evolution and Good 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 Good 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 Good Gaming, you can compare the effects of market volatilities on Evolution and Good 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 Good Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution and Good Gaming.

Diversification Opportunities for Evolution and Good Gaming

-0.19

Correlation Coefficient

Evolution  Good Gaming

Good diversification

The 3 months correlation between Evolution and Good is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Good Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Gaming 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 Good Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Gaming has no effect on the direction of Evolution i.e., Evolution and Good Gaming go up and down completely randomly.

Pair Corralation between Evolution and Good Gaming

Assuming the 90 days horizon Evolution is expected to generate 4.39 times less return on investment than Good Gaming. But when comparing it to its historical volatility, Evolution AB is 4.13 times less risky than Good Gaming. It trades about 0.07 of its potential returns per unit of risk. Good Gaming is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.03  in Good Gaming on December 21, 2024 and sell it today you would earn a total of  0.18  from holding Good Gaming or generate 17.48% 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.  Good Gaming

Evolution AB

Risk-Adjusted Performance

Modest

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Evolution may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Good Gaming

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Good Gaming are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Good Gaming reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolution and Good Gaming

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

The idea behind Evolution AB and Good Gaming 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.