Correlation Between Evolution Gaming and InterContinental

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

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

Diversification Opportunities for Evolution Gaming and InterContinental

-0.42

Correlation Coefficient

Evolution Gaming  InterContinental

Very good diversification

The 3 months correlation between Evolution and InterContinental is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Gaming Group and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Evolution Gaming 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 Gaming Group are associated (or correlated) with InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Evolution Gaming i.e., Evolution Gaming and InterContinental go up and down completely randomly.

Pair Corralation between Evolution Gaming and InterContinental

Assuming the 90 days trading horizon Evolution Gaming Group is expected to under-perform the InterContinental. In addition to that, Evolution Gaming is 1.83 times more volatile than InterContinental Hotels Group. It trades about -0.04 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.32 per unit of volatility. If you would invest  784,800  in InterContinental Hotels Group on September 13, 2024 and sell it today you would earn a total of  207,000  from holding InterContinental Hotels Group or generate 26.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Evolution Gaming Group  vs.  InterContinental Hotels Group

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 comparatively stable basic indicators, Evolution Gaming is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

InterContinental Hotels

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, InterContinental exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolution Gaming and InterContinental

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

The idea behind Evolution Gaming Group and InterContinental Hotels 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.