Correlation Between Evolution Mining and Yokohama Rubber

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

Diversification Opportunities for Evolution Mining and Yokohama Rubber

-0.41

Correlation Coefficient

Evolution Mining  Yokohama Rubber

Very good diversification

The 3 months correlation between Evolution and Yokohama is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining Limited and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Evolution Mining i.e., Evolution Mining and Yokohama Rubber go up and down completely randomly.

Pair Corralation between Evolution Mining and Yokohama Rubber

Assuming the 90 days horizon Evolution Mining is expected to generate 1.98 times less return on investment than Yokohama Rubber. In addition to that, Evolution Mining is 1.36 times more volatile than The Yokohama Rubber. It trades about 0.01 of its total potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.03 per unit of volatility. If you would invest  2,000  in The Yokohama Rubber on September 29, 2024 and sell it today you would earn a total of  40.00  from holding The Yokohama Rubber or generate 2.0% 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.  The Yokohama Rubber

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.

Yokohama Rubber

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Evolution Mining and Yokohama Rubber

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

The idea behind Evolution Mining Limited and The Yokohama Rubber 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.