Correlation Between Evolve Active and Evolve Innovation

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

By analyzing existing cross correlation between Evolve Active Core and Evolve Innovation Index, you can compare the effects of market volatilities on Evolve Active and Evolve Innovation 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 Evolve Active with a short position of Evolve Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolve Active and Evolve Innovation.

Diversification Opportunities for Evolve Active and Evolve Innovation

0.62

Correlation Coefficient

Evolve Active  Evolve Innovation

Poor diversification

The 3 months correlation between Evolve and Evolve is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Evolve Active Core and Evolve Innovation Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Innovation Index and Evolve Active 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 Evolve Active Core are associated (or correlated) with Evolve Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Innovation Index has no effect on the direction of Evolve Active i.e., Evolve Active and Evolve Innovation go up and down completely randomly.

Pair Corralation between Evolve Active and Evolve Innovation

Assuming the 90 days trading horizon Evolve Active Core is expected to generate 0.34 times more return on investment than Evolve Innovation. However, Evolve Active Core is 2.98 times less risky than Evolve Innovation. It trades about 0.03 of its potential returns per unit of risk. Evolve Innovation Index is currently generating about -0.02 per unit of risk. If you would invest  1,821  in Evolve Active Core on December 1, 2024 and sell it today you would earn a total of  13.00  from holding Evolve Active Core or generate 0.71% return on investment over 90 days.

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

Evolve Active Core  vs.  Evolve Innovation Index

Evolve Active Core

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Active Core are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Evolve Active is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Evolve Innovation Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolve Innovation Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolve Innovation is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Evolve Active and Evolve Innovation

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

The idea behind Evolve Active Core and Evolve Innovation Index 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .