Correlation Between Starbreeze and Evolution

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

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

Diversification Opportunities for Starbreeze and Evolution

0.31

Correlation Coefficient

Starbreeze  Evolution

Weak diversification

The 3 months correlation between Starbreeze and Evolution is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Starbreeze AB and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and Starbreeze 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 Starbreeze AB 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 Starbreeze i.e., Starbreeze and Evolution go up and down completely randomly.

Pair Corralation between Starbreeze and Evolution

Assuming the 90 days trading horizon Starbreeze AB is expected to generate 1.92 times more return on investment than Evolution. However, Starbreeze is 1.92 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 -0.19 per unit of risk. If you would invest  19.00  in Starbreeze AB on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Starbreeze AB or generate 0.0% return on investment over 90 days.

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

Starbreeze AB  vs.  Evolution AB

Starbreeze AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starbreeze 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 basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company 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. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Starbreeze and Evolution

The main advantage of trading using opposite Starbreeze and Evolution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbreeze 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 Starbreeze AB 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.