Correlation Between Evolution Mining and ITALIAN WINE

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

Diversification Opportunities for Evolution Mining and ITALIAN WINE

0.57

Correlation Coefficient

Evolution Mining  ITALIAN WINE

Very weak diversification

The 3 months correlation between Evolution and ITALIAN is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining Limited and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS 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 ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of Evolution Mining i.e., Evolution Mining and ITALIAN WINE go up and down completely randomly.

Pair Corralation between Evolution Mining and ITALIAN WINE

Assuming the 90 days horizon Evolution Mining is expected to generate 5.82 times less return on investment than ITALIAN WINE. But when comparing it to its historical volatility, Evolution Mining Limited is 1.22 times less risky than ITALIAN WINE. It trades about 0.01 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,100  in ITALIAN WINE BRANDS on September 27, 2024 and sell it today you would earn a total of  130.00  from holding ITALIAN WINE BRANDS or generate 6.19% return on investment over 90 days.

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

Evolution Mining Limited  vs.  ITALIAN WINE BRANDS

Evolution Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Evolution Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ITALIAN WINE BRANDS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ITALIAN WINE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Evolution Mining and ITALIAN WINE

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

The idea behind Evolution Mining Limited and ITALIAN WINE BRANDS 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.