Correlation Between Evolution Gaming and EON Resources

Can any of the company-specific risk be diversified away by investing in both Evolution Gaming and EON Resources 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 EON Resources 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 EON Resources, you can compare the effects of market volatilities on Evolution Gaming and EON Resources 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 EON Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Gaming and EON Resources.

Diversification Opportunities for Evolution Gaming and EON Resources

0.69

Correlation Coefficient

Evolution Gaming  EON Resources

Poor diversification

The 3 months correlation between Evolution and EON is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Gaming Group and EON Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON Resources 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 EON Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON Resources has no effect on the direction of Evolution Gaming i.e., Evolution Gaming and EON Resources go up and down completely randomly.

Pair Corralation between Evolution Gaming and EON Resources

Assuming the 90 days horizon Evolution Gaming Group is expected to generate 0.16 times more return on investment than EON Resources. However, Evolution Gaming Group is 6.35 times less risky than EON Resources. It trades about -0.08 of its potential returns per unit of risk. EON Resources is currently generating about -0.03 per unit of risk. If you would invest  9,584  in Evolution Gaming Group on September 30, 2024 and sell it today you would lose (1,840) from holding Evolution Gaming Group or give up 19.2% of portfolio value over 90 days.

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

Evolution Gaming Group  vs.  EON Resources

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 fragile 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.

EON Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EON Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, EON Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolution Gaming and EON Resources

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

The idea behind Evolution Gaming Group and EON Resources 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.