Correlation Between Evolution and 888 Holdings

Can any of the company-specific risk be diversified away by investing in both Evolution and 888 Holdings 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 and 888 Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Evolution AB and 888 Holdings, you can compare the effects of market volatilities on Evolution and 888 Holdings 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 with a short position of 888 Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution and 888 Holdings.

Diversification Opportunities for Evolution and 888 Holdings

0.29

Correlation Coefficient

Evolution  888 Holdings

Modest diversification

The 3 months correlation between Evolution and 888 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and 888 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 888 Holdings and Evolution 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 AB are associated (or correlated) with 888 Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 888 Holdings has no effect on the direction of Evolution i.e., Evolution and 888 Holdings go up and down completely randomly.

Pair Corralation between Evolution and 888 Holdings

Assuming the 90 days horizon Evolution AB is expected to under-perform the 888 Holdings. In addition to that, Evolution is 1.2 times more volatile than 888 Holdings. It trades about -0.11 of its total potential returns per unit of risk. 888 Holdings is currently generating about -0.01 per unit of volatility. If you would invest  117.00  in 888 Holdings on February 25, 2024 and sell it today you would lose (3.00) from holding 888 Holdings or give up 2.56% of portfolio value over 90 days.

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

Evolution AB  vs.  888 Holdings

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

888 Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 888 Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, 888 Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Evolution and 888 Holdings

The main advantage of trading using opposite Evolution and 888 Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution position performs unexpectedly, 888 Holdings 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 888 Holdings will offset losses from the drop in 888 Holdings' long position.

The idea behind Evolution AB and 888 Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.