Correlation Between Evolution and Nitro Games

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

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

Diversification Opportunities for Evolution and Nitro Games

0.08

Correlation Coefficient

Evolution  Nitro Games

Significant diversification

The 3 months correlation between Evolution and Nitro is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Nitro Games Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitro Games Oyj 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 Nitro Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitro Games Oyj has no effect on the direction of Evolution i.e., Evolution and Nitro Games go up and down completely randomly.

Pair Corralation between Evolution and Nitro Games

Assuming the 90 days trading horizon Evolution AB is expected to generate 0.45 times more return on investment than Nitro Games. However, Evolution AB is 2.23 times less risky than Nitro Games. It trades about -0.02 of its potential returns per unit of risk. Nitro Games Oyj is currently generating about -0.01 per unit of risk. If you would invest  101,050  in Evolution AB on September 13, 2024 and sell it today you would lose (4,430) from holding Evolution AB or give up 4.38% 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.  Nitro Games Oyj

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

Nitro Games Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nitro Games Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nitro Games is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Evolution and Nitro Games

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

The idea behind Evolution AB and Nitro Games Oyj 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.