Correlation Between The9 and Evolution Gaming

Can any of the company-specific risk be diversified away by investing in both The9 and Evolution Gaming 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 The9 and Evolution Gaming into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The9 Ltd ADR and Evolution Gaming Group, you can compare the effects of market volatilities on The9 and Evolution Gaming 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 The9 with a short position of Evolution Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and Evolution Gaming.

Diversification Opportunities for The9 and Evolution Gaming

-0.32

Correlation Coefficient

The9  Evolution Gaming

Very good diversification

The 3 months correlation between The9 and Evolution is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR and Evolution Gaming Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Gaming and The9 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 The9 Ltd ADR are associated (or correlated) with Evolution Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Gaming has no effect on the direction of The9 i.e., The9 and Evolution Gaming go up and down completely randomly.

Pair Corralation between The9 and Evolution Gaming

Given the investment horizon of 90 days The9 Ltd ADR is expected to under-perform the Evolution Gaming. In addition to that, The9 is 2.38 times more volatile than Evolution Gaming Group. It trades about -0.18 of its total potential returns per unit of risk. Evolution Gaming Group is currently generating about -0.05 per unit of volatility. If you would invest  8,046  in Evolution Gaming Group on November 29, 2024 and sell it today you would lose (259.00) from holding Evolution Gaming Group or give up 3.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

The9 Ltd ADR  vs.  Evolution Gaming Group

The9 Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days The9 Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with The9 and Evolution Gaming

The main advantage of trading using opposite The9 and Evolution Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 position performs unexpectedly, Evolution Gaming 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 Gaming will offset losses from the drop in Evolution Gaming's long position.

The idea behind The9 Ltd ADR and Evolution Gaming Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.