Correlation Between Evolution Mining and Australian Potash

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

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

Diversification Opportunities for Evolution Mining and Australian Potash

-0.22

Correlation Coefficient

Evolution Mining  Australian Potash

Very good diversification

The 3 months correlation between Evolution and Australian is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining and Australian Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Potash and Evolution Mining 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 Mining are associated (or correlated) with Australian Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Potash has no effect on the direction of Evolution Mining i.e., Evolution Mining and Australian Potash go up and down completely randomly.

Pair Corralation between Evolution Mining and Australian Potash

Assuming the 90 days trading horizon Evolution Mining is expected to generate 0.14 times more return on investment than Australian Potash. However, Evolution Mining is 6.99 times less risky than Australian Potash. It trades about 0.07 of its potential returns per unit of risk. Australian Potash is currently generating about -0.03 per unit of risk. If you would invest  440.00  in Evolution Mining on September 20, 2024 and sell it today you would earn a total of  42.00  from holding Evolution Mining or generate 9.55% return on investment over 90 days.

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

Evolution Mining  vs.  Australian Potash

Evolution Mining

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Evolution Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Australian Potash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Potash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Evolution Mining and Australian Potash

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

The idea behind Evolution Mining and Australian Potash 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.