Correlation Between Evolution Gaming and ROYALTY

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

Diversification Opportunities for Evolution Gaming and ROYALTY

0.1

Correlation Coefficient

Evolution Gaming  ROYALTY

Average diversification

The 3 months correlation between Evolution and ROYALTY is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Gaming Group and ROYALTY PHARMA PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROYALTY PHARMA PLC 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 ROYALTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROYALTY PHARMA PLC has no effect on the direction of Evolution Gaming i.e., Evolution Gaming and ROYALTY go up and down completely randomly.

Pair Corralation between Evolution Gaming and ROYALTY

Assuming the 90 days horizon Evolution Gaming Group is expected to generate 2.88 times more return on investment than ROYALTY. However, Evolution Gaming is 2.88 times more volatile than ROYALTY PHARMA PLC. It trades about 0.07 of its potential returns per unit of risk. ROYALTY PHARMA PLC is currently generating about -0.17 per unit of risk. If you would invest  7,592  in Evolution Gaming Group on October 27, 2024 and sell it today you would earn a total of  177.00  from holding Evolution Gaming Group or generate 2.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Evolution Gaming Group  vs.  ROYALTY PHARMA PLC

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.

ROYALTY PHARMA PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROYALTY PHARMA PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ROYALTY is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Evolution Gaming and ROYALTY

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

The idea behind Evolution Gaming Group and ROYALTY PHARMA PLC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.