Correlation Between Good Gaming and Evolution

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

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

Diversification Opportunities for Good Gaming and Evolution

0.3

Correlation Coefficient

Good Gaming  Evolution

Weak diversification

The 3 months correlation between Good and Evolution is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Good Gaming and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and Good 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 Good Gaming are associated (or correlated) with Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution AB has no effect on the direction of Good Gaming i.e., Good Gaming and Evolution go up and down completely randomly.

Pair Corralation between Good Gaming and Evolution

Given the investment horizon of 90 days Good Gaming is expected to generate 3.1 times more return on investment than Evolution. However, Good Gaming is 3.1 times more volatile than Evolution AB. It trades about 0.03 of its potential returns per unit of risk. Evolution AB is currently generating about -0.09 per unit of risk. If you would invest  0.95  in Good Gaming on September 3, 2024 and sell it today you would lose (0.04) from holding Good Gaming or give up 4.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Good Gaming  vs.  Evolution AB

Good Gaming

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Good Gaming are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, Good Gaming reported solid returns over the last few months and may actually be approaching a breakup point.

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Good Gaming and Evolution

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

The idea behind Good Gaming and Evolution AB 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.