Correlation Between BYD and Evolution Gaming
Can any of the company-specific risk be diversified away by investing in both BYD 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 BYD and Evolution Gaming into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Evolution Gaming Group, you can compare the effects of market volatilities on BYD 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 BYD with a short position of Evolution Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Evolution Gaming.
Diversification Opportunities for BYD and Evolution Gaming
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BYD and Evolution is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Evolution Gaming Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Gaming and BYD 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 BYD Co 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 BYD i.e., BYD and Evolution Gaming go up and down completely randomly.
Pair Corralation between BYD and Evolution Gaming
Assuming the 90 days trading horizon BYD Co is expected to generate 5.99 times more return on investment than Evolution Gaming. However, BYD is 5.99 times more volatile than Evolution Gaming Group. It trades about 0.07 of its potential returns per unit of risk. Evolution Gaming Group is currently generating about -0.07 per unit of risk. If you would invest 2,756 in BYD Co on October 13, 2024 and sell it today you would earn a total of 804.00 from holding BYD Co or generate 29.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Co vs. Evolution Gaming Group
Performance |
| Timeline |
| BYD Co |
| Evolution Gaming |
BYD and Evolution Gaming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and Evolution Gaming
The main advantage of trading using opposite BYD and Evolution Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD 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 BYD Co 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.| Evolution Gaming vs. Walmart | Evolution Gaming vs. BYD Co | Evolution Gaming vs. Volkswagen AG | Evolution Gaming vs. Volkswagen AG Non Vtg |
Check out your portfolio center.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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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