Correlation Between Evolution Gaming and NL Industries

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

Diversification Opportunities for Evolution Gaming and NL Industries

0.16

Correlation Coefficient

Evolution Gaming  NL Industries

Average diversification

The 3 months correlation between Evolution and NL Industries is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Gaming Group and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Evolution Gaming i.e., Evolution Gaming and NL Industries go up and down completely randomly.

Pair Corralation between Evolution Gaming and NL Industries

Assuming the 90 days horizon Evolution Gaming is expected to generate 7.99 times less return on investment than NL Industries. But when comparing it to its historical volatility, Evolution Gaming Group is 1.57 times less risky than NL Industries. It trades about 0.01 of its potential returns per unit of risk. NL Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  764.00  in NL Industries on December 29, 2024 and sell it today you would earn a total of  41.00  from holding NL Industries or generate 5.37% return on investment over 90 days.

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

Evolution Gaming Group  vs.  NL Industries

Evolution Gaming

Risk-Adjusted Performance

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 fairly strong basic indicators, Evolution Gaming is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NL Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, NL Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Evolution Gaming and NL Industries

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

The idea behind Evolution Gaming Group and NL Industries 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.