Correlation Between SPORTING and Evolution

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

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

Diversification Opportunities for SPORTING and Evolution

0.47

Correlation Coefficient

SPORTING  Evolution

Very weak diversification

The 3 months correlation between SPORTING and Evolution is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and SPORTING 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 SPORTING 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 SPORTING i.e., SPORTING and Evolution go up and down completely randomly.

Pair Corralation between SPORTING and Evolution

Assuming the 90 days trading horizon SPORTING is expected to generate 1.1 times more return on investment than Evolution. However, SPORTING is 1.1 times more volatile than Evolution AB. It trades about 0.01 of its potential returns per unit of risk. Evolution AB is currently generating about -0.02 per unit of risk. If you would invest  78.00  in SPORTING on October 4, 2024 and sell it today you would earn a total of  3.00  from holding SPORTING or generate 3.85% return on investment over 90 days.

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

SPORTING  vs.  Evolution AB

SPORTING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORTING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SPORTING and Evolution

The main advantage of trading using opposite SPORTING and Evolution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORTING 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 SPORTING 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.