Correlation Between Retail Estates and Evolution Mining

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

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

Diversification Opportunities for Retail Estates and Evolution Mining

-0.24

Correlation Coefficient

Retail Estates  Evolution Mining

Very good diversification

The 3 months correlation between Retail and Evolution is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Evolution Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining and Retail Estates 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 Retail Estates NV are associated (or correlated) with Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Retail Estates i.e., Retail Estates and Evolution Mining go up and down completely randomly.

Pair Corralation between Retail Estates and Evolution Mining

Assuming the 90 days horizon Retail Estates NV is expected to generate 0.58 times more return on investment than Evolution Mining. However, Retail Estates NV is 1.73 times less risky than Evolution Mining. It trades about 0.07 of its potential returns per unit of risk. Evolution Mining Limited is currently generating about -0.1 per unit of risk. If you would invest  5,820  in Retail Estates NV on October 3, 2024 and sell it today you would earn a total of  80.00  from holding Retail Estates NV or generate 1.37% return on investment over 90 days.

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

Retail Estates NV  vs.  Evolution Mining Limited

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Evolution Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Evolution Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Retail Estates and Evolution Mining

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

The idea behind Retail Estates NV and Evolution Mining Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.