Correlation Between Everi Holdings and Light Wonder

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

By analyzing existing cross correlation between Everi Holdings and Light Wonder, you can compare the effects of market volatilities on Everi Holdings and Light Wonder 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 Everi Holdings with a short position of Light Wonder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everi Holdings and Light Wonder.

Diversification Opportunities for Everi Holdings and Light Wonder

0.65

Correlation Coefficient

Everi Holdings  Light Wonder

Poor diversification

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

Pair Corralation between Everi Holdings and Light Wonder

Given the investment horizon of 90 days Everi Holdings is expected to generate 17.73 times less return on investment than Light Wonder. But when comparing it to its historical volatility, Everi Holdings is 12.5 times less risky than Light Wonder. It trades about 0.08 of its potential returns per unit of risk. Light Wonder is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,522  in Light Wonder on December 28, 2024 and sell it today you would earn a total of  1,414  from holding Light Wonder or generate 16.59% return on investment over 90 days.

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

Everi Holdings  vs.  Light Wonder

Everi Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Everi Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Everi Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Light Wonder

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Light Wonder are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Light Wonder showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Everi Holdings and Light Wonder

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

The idea behind Everi Holdings and Light Wonder 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.