Correlation Between Evolution Gaming and Eastman Chemical

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

By analyzing existing cross correlation between Evolution Gaming Group and Eastman Chemical, you can compare the effects of market volatilities on Evolution Gaming and Eastman Chemical 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 Gaming with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Gaming and Eastman Chemical.

Diversification Opportunities for Evolution Gaming and Eastman Chemical

0.76

Correlation Coefficient

Evolution Gaming  Eastman Chemical

Poor diversification

The 3 months correlation between Evolution and Eastman is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Gaming Group and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Evolution Gaming 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 Gaming Group are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Evolution Gaming i.e., Evolution Gaming and Eastman Chemical go up and down completely randomly.

Pair Corralation between Evolution Gaming and Eastman Chemical

Assuming the 90 days horizon Evolution Gaming Group is expected to generate 1.85 times more return on investment than Eastman Chemical. However, Evolution Gaming is 1.85 times more volatile than Eastman Chemical. It trades about -0.08 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.15 per unit of risk. If you would invest  8,968  in Evolution Gaming Group on October 20, 2024 and sell it today you would lose (1,233) from holding Evolution Gaming Group or give up 13.75% of portfolio value over 90 days.

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

Evolution Gaming Group  vs.  Eastman Chemical

Evolution Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Gaming Group 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 fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical 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 primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Evolution Gaming and Eastman Chemical

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

The idea behind Evolution Gaming Group and Eastman Chemical 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.