Correlation Between Evolution Mining and NEXON

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

By analyzing existing cross correlation between Evolution Mining Limited and NEXON Co, you can compare the effects of market volatilities on Evolution Mining and NEXON 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 NEXON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Mining and NEXON.

Diversification Opportunities for Evolution Mining and NEXON

-0.43

Correlation Coefficient

Evolution Mining  NEXON

Very good diversification

The 3 months correlation between Evolution and NEXON is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining Limited and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON 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 Limited are associated (or correlated) with NEXON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON has no effect on the direction of Evolution Mining i.e., Evolution Mining and NEXON go up and down completely randomly.

Pair Corralation between Evolution Mining and NEXON

Assuming the 90 days horizon Evolution Mining Limited is expected to generate 0.81 times more return on investment than NEXON. However, Evolution Mining Limited is 1.24 times less risky than NEXON. It trades about 0.15 of its potential returns per unit of risk. NEXON Co is currently generating about -0.12 per unit of risk. If you would invest  260.00  in Evolution Mining Limited on September 13, 2024 and sell it today you would earn a total of  54.00  from holding Evolution Mining Limited or generate 20.77% return on investment over 90 days.

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

Evolution Mining Limited  vs.  NEXON Co

Evolution Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolution Mining reported solid returns over the last few months and may actually be approaching a breakup point.

NEXON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXON Co 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 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 NEXON

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

The idea behind Evolution Mining Limited and NEXON Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.