Correlation Between EP Financial and Evolution Mining

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

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

Diversification Opportunities for EP Financial and Evolution Mining

0.25

Correlation Coefficient

EP Financial  Evolution Mining

Modest diversification

The 3 months correlation between EP1 and Evolution is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining and EP Financial 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 EP Financial Group are associated (or correlated) with Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of EP Financial i.e., EP Financial and Evolution Mining go up and down completely randomly.

Pair Corralation between EP Financial and Evolution Mining

Assuming the 90 days trading horizon EP Financial Group is expected to generate 1.23 times more return on investment than Evolution Mining. However, EP Financial is 1.23 times more volatile than Evolution Mining. It trades about 0.05 of its potential returns per unit of risk. Evolution Mining is currently generating about -0.06 per unit of risk. If you would invest  51.00  in EP Financial Group on September 25, 2024 and sell it today you would earn a total of  1.00  from holding EP Financial Group or generate 1.96% return on investment over 90 days.

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

EP Financial Group  vs.  Evolution Mining

EP Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EP Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Evolution Mining

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Evolution Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EP Financial and Evolution Mining

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

The idea behind EP Financial Group and Evolution Mining 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.