Correlation Between Evolution Mining and Big 5

Can any of the company-specific risk be diversified away by investing in both Evolution Mining and Big 5 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 Big 5 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 Big 5 Sporting, you can compare the effects of market volatilities on Evolution Mining and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Mining and Big 5.

Diversification Opportunities for Evolution Mining and Big 5

-0.23

Correlation Coefficient

Evolution Mining  Big 5

Very good diversification

The 3 months correlation between Evolution and Big is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining Limited and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Evolution Mining i.e., Evolution Mining and Big 5 go up and down completely randomly.

Pair Corralation between Evolution Mining and Big 5

Assuming the 90 days horizon Evolution Mining Limited is expected to under-perform the Big 5. But the stock apears to be less risky and, when comparing its historical volatility, Evolution Mining Limited is 5.2 times less risky than Big 5. The stock trades about -0.11 of its potential returns per unit of risk. The Big 5 Sporting is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  158.00  in Big 5 Sporting on September 24, 2024 and sell it today you would earn a total of  5.00  from holding Big 5 Sporting or generate 3.16% return on investment over 90 days.

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

Evolution Mining Limited  vs.  Big 5 Sporting

Evolution Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Evolution Mining is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Big 5 Sporting

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Big 5 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Evolution Mining and Big 5

The main advantage of trading using opposite Evolution Mining and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution Mining position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Evolution Mining Limited and Big 5 Sporting 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.