Correlation Between Evolve NASDAQ and Evolve Active

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

By analyzing existing cross correlation between Evolve NASDAQ Technology and Evolve Active Core, you can compare the effects of market volatilities on Evolve NASDAQ and Evolve Active 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 Evolve NASDAQ with a short position of Evolve Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolve NASDAQ and Evolve Active.

Diversification Opportunities for Evolve NASDAQ and Evolve Active

0.29

Correlation Coefficient

Evolve NASDAQ  Evolve Active

Modest diversification

The 3 months correlation between Evolve and Evolve is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Evolve NASDAQ Technology and Evolve Active Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Active Core and Evolve NASDAQ 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 Evolve NASDAQ Technology are associated (or correlated) with Evolve Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Active Core has no effect on the direction of Evolve NASDAQ i.e., Evolve NASDAQ and Evolve Active go up and down completely randomly.

Pair Corralation between Evolve NASDAQ and Evolve Active

Assuming the 90 days trading horizon Evolve NASDAQ Technology is expected to generate 4.14 times more return on investment than Evolve Active. However, Evolve NASDAQ is 4.14 times more volatile than Evolve Active Core. It trades about 0.2 of its potential returns per unit of risk. Evolve Active Core is currently generating about 0.31 per unit of risk. If you would invest  3,125  in Evolve NASDAQ Technology on September 5, 2024 and sell it today you would earn a total of  182.00  from holding Evolve NASDAQ Technology or generate 5.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Evolve NASDAQ Technology  vs.  Evolve Active Core

Evolve NASDAQ Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve NASDAQ Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Evolve NASDAQ sustained solid returns over the last few months and may actually be approaching a breakup point.

Evolve Active Core

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Active Core are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Evolve Active is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Evolve NASDAQ and Evolve Active

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

The idea behind Evolve NASDAQ Technology and Evolve Active Core 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 Stocks Directory module to find actively traded stocks across global markets.