Correlation Between Evolve Canadian and Evolve Banks

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

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

Diversification Opportunities for Evolve Canadian and Evolve Banks

0.97

Correlation Coefficient

Evolve Canadian  Evolve Banks

Almost no diversification

The 3 months correlation between Evolve and Evolve is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Evolve Canadian Banks and Evolve Banks Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Banks Enhanced and Evolve Canadian 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 Evolve Canadian Banks are associated (or correlated) with Evolve Banks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Banks Enhanced has no effect on the direction of Evolve Canadian i.e., Evolve Canadian and Evolve Banks go up and down completely randomly.

Pair Corralation between Evolve Canadian and Evolve Banks

Assuming the 90 days trading horizon Evolve Canadian is expected to generate 1.68 times less return on investment than Evolve Banks. But when comparing it to its historical volatility, Evolve Canadian Banks is 3.0 times less risky than Evolve Banks. It trades about 0.33 of its potential returns per unit of risk. Evolve Banks Enhanced is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,188  in Evolve Banks Enhanced on September 12, 2024 and sell it today you would earn a total of  231.00  from holding Evolve Banks Enhanced or generate 19.44% return on investment over 90 days.

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

Evolve Canadian Banks  vs.  Evolve Banks Enhanced

Evolve Canadian Banks

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Canadian Banks are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Evolve Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Evolve Banks Enhanced

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Banks Enhanced are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Evolve Banks displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolve Canadian and Evolve Banks

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

The idea behind Evolve Canadian Banks and Evolve Banks Enhanced 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.