Correlation Between SM Investments and Evolution Gaming

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

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

Diversification Opportunities for SM Investments and Evolution Gaming

-0.26

Correlation Coefficient

SM Investments  Evolution Gaming

Very good diversification

The 3 months correlation between SVTMF and Evolution is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Evolution Gaming Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Gaming and SM Investments 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 SM Investments 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 SM Investments i.e., SM Investments and Evolution Gaming go up and down completely randomly.

Pair Corralation between SM Investments and Evolution Gaming

Assuming the 90 days horizon SM Investments is expected to generate 0.82 times more return on investment than Evolution Gaming. However, SM Investments is 1.22 times less risky than Evolution Gaming. It trades about 0.07 of its potential returns per unit of risk. Evolution Gaming Group is currently generating about -0.11 per unit of risk. If you would invest  1,420  in SM Investments on October 11, 2024 and sell it today you would earn a total of  121.00  from holding SM Investments or generate 8.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

SM Investments  vs.  Evolution Gaming Group

SM Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, SM Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Evolution Gaming

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain fairly 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.

Pair Trading with SM Investments and Evolution Gaming

The main advantage of trading using opposite SM Investments and Evolution Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments 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 SM Investments 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.