Correlation Between Sankyo and Evolution
Can any of the company-specific risk be diversified away by investing in both Sankyo 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 Sankyo and Evolution into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sankyo Co and Evolution AB, you can compare the effects of market volatilities on Sankyo 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 Sankyo with a short position of Evolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sankyo and Evolution.
Diversification Opportunities for Sankyo and Evolution
Good diversification
The 3 months correlation between Sankyo and Evolution is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sankyo Co and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and Sankyo 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 Sankyo Co 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 Sankyo i.e., Sankyo and Evolution go up and down completely randomly.
Pair Corralation between Sankyo and Evolution
Assuming the 90 days horizon Sankyo Co is expected to generate 1.6 times more return on investment than Evolution. However, Sankyo is 1.6 times more volatile than Evolution AB. It trades about 0.26 of its potential returns per unit of risk. Evolution AB is currently generating about -0.13 per unit of risk. If you would invest 1,180 in Sankyo Co on September 3, 2024 and sell it today you would earn a total of 140.00 from holding Sankyo Co or generate 11.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sankyo Co vs. Evolution AB
Performance |
| Timeline |
| Sankyo |
| Evolution AB |
Sankyo and Evolution Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sankyo and Evolution
The main advantage of trading using opposite Sankyo and Evolution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sankyo 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.| Sankyo vs. UMC Electronics Co | Sankyo vs. Electronic Arts | Sankyo vs. Cogent Communications Holdings | Sankyo vs. United Internet AG |
| Evolution vs. EPSILON HEALTHCARE LTD | Evolution vs. Ares Management Corp | Evolution vs. CeoTronics AG | Evolution vs. Sixt Leasing SE |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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