Correlation Between Evolution and La Franaise

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

By analyzing existing cross correlation between Evolution AB and La Franaise des, you can compare the effects of market volatilities on Evolution and La Franaise 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 La Franaise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution and La Franaise.

Diversification Opportunities for Evolution and La Franaise

0.09

Correlation Coefficient

Evolution  La Franaise

Significant diversification

The 3 months correlation between Evolution and 1WE is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and La Franaise des in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Franaise des 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 La Franaise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Franaise des has no effect on the direction of Evolution i.e., Evolution and La Franaise go up and down completely randomly.

Pair Corralation between Evolution and La Franaise

Assuming the 90 days trading horizon Evolution AB is expected to under-perform the La Franaise. In addition to that, Evolution is 1.24 times more volatile than La Franaise des. It trades about -0.08 of its total potential returns per unit of risk. La Franaise des is currently generating about -0.02 per unit of volatility. If you would invest  3,796  in La Franaise des on September 22, 2024 and sell it today you would lose (126.00) from holding La Franaise des or give up 3.32% of portfolio value over 90 days.

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

Evolution AB  vs.  La Franaise des

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 latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

La Franaise des

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Evolution and La Franaise

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

The idea behind Evolution AB and La Franaise des 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.