Correlation Between Evolution Gaming and CarsalesCom

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

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

Diversification Opportunities for Evolution Gaming and CarsalesCom

-0.28

Correlation Coefficient

Evolution Gaming  CarsalesCom

Very good diversification

The 3 months correlation between Evolution and CarsalesCom is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Gaming Group and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and Evolution Gaming 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 Gaming Group are associated (or correlated) with CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Evolution Gaming i.e., Evolution Gaming and CarsalesCom go up and down completely randomly.

Pair Corralation between Evolution Gaming and CarsalesCom

Assuming the 90 days horizon Evolution Gaming Group is expected to under-perform the CarsalesCom. But the pink sheet apears to be less risky and, when comparing its historical volatility, Evolution Gaming Group is 1.16 times less risky than CarsalesCom. The pink sheet trades about -0.15 of its potential returns per unit of risk. The CarsalesCom Ltd ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,985  in CarsalesCom Ltd ADR on September 25, 2024 and sell it today you would lose (435.00) from holding CarsalesCom Ltd ADR or give up 8.73% of portfolio value over 90 days.

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

Evolution Gaming Group  vs.  CarsalesCom Ltd ADR

Evolution Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Gaming Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Evolution Gaming and CarsalesCom

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

The idea behind Evolution Gaming Group and CarsalesCom Ltd ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.