Correlation Between Evolution Mining and IMPERIAL TOBACCO

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

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

Diversification Opportunities for Evolution Mining and IMPERIAL TOBACCO

0.26

Correlation Coefficient

Evolution Mining  IMPERIAL TOBACCO

Modest diversification

The 3 months correlation between Evolution and IMPERIAL is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining Limited and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and Evolution Mining 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 Evolution Mining Limited are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of Evolution Mining i.e., Evolution Mining and IMPERIAL TOBACCO go up and down completely randomly.

Pair Corralation between Evolution Mining and IMPERIAL TOBACCO

Assuming the 90 days horizon Evolution Mining Limited is expected to generate 2.19 times more return on investment than IMPERIAL TOBACCO. However, Evolution Mining is 2.19 times more volatile than IMPERIAL TOBACCO . It trades about 0.1 of its potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.15 per unit of risk. If you would invest  176.00  in Evolution Mining Limited on October 7, 2024 and sell it today you would earn a total of  117.00  from holding Evolution Mining Limited or generate 66.48% return on investment over 90 days.

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

Evolution Mining Limited  vs.  IMPERIAL TOBACCO

Evolution Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining Limited are ranked lower than 3 (%) 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.

IMPERIAL TOBACCO

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, IMPERIAL TOBACCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolution Mining and IMPERIAL TOBACCO

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

The idea behind Evolution Mining Limited and IMPERIAL TOBACCO 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.