Correlation Between Evolution and Mekonomen

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

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

Diversification Opportunities for Evolution and Mekonomen

0.15

Correlation Coefficient

Evolution  Mekonomen

Average diversification

The 3 months correlation between Evolution and Mekonomen is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Mekonomen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mekonomen 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 Mekonomen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mekonomen AB has no effect on the direction of Evolution i.e., Evolution and Mekonomen go up and down completely randomly.

Pair Corralation between Evolution and Mekonomen

Assuming the 90 days trading horizon Evolution AB is expected to under-perform the Mekonomen. In addition to that, Evolution is 1.74 times more volatile than Mekonomen AB. It trades about -0.04 of its total potential returns per unit of risk. Mekonomen AB is currently generating about -0.04 per unit of volatility. If you would invest  13,632  in Mekonomen AB on October 10, 2024 and sell it today you would lose (552.00) from holding Mekonomen AB or give up 4.05% of portfolio value over 90 days.

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

Evolution AB  vs.  Mekonomen AB

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. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Mekonomen AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mekonomen AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mekonomen is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Evolution and Mekonomen

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

The idea behind Evolution AB and Mekonomen 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.