Correlation Between Evolution and Indutrade

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

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

Diversification Opportunities for Evolution and Indutrade

-0.65

Correlation Coefficient

Evolution  Indutrade

Excellent diversification

The 3 months correlation between Evolution and Indutrade is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB 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 Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Evolution i.e., Evolution and Indutrade go up and down completely randomly.

Pair Corralation between Evolution and Indutrade

Assuming the 90 days trading horizon Evolution AB is expected to under-perform the Indutrade. In addition to that, Evolution is 1.57 times more volatile than Indutrade AB. It trades about -0.09 of its total potential returns per unit of risk. Indutrade AB is currently generating about 0.15 per unit of volatility. If you would invest  27,840  in Indutrade AB on November 29, 2024 and sell it today you would earn a total of  3,660  from holding Indutrade AB or generate 13.15% return on investment over 90 days.

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

Evolution AB  vs.  Indutrade AB

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. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Indutrade AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indutrade AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Indutrade unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolution and Indutrade

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

The idea behind Evolution AB and Indutrade AB 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.