Correlation Between Evolution and Paradox Interactive

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

By analyzing existing cross correlation between Evolution AB and Paradox Interactive AB, you can compare the effects of market volatilities on Evolution and Paradox Interactive 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 with a short position of Paradox Interactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution and Paradox Interactive.

Diversification Opportunities for Evolution and Paradox Interactive

-0.73

Correlation Coefficient

Evolution  Paradox Interactive

Pay attention - limited upside

The 3 months correlation between Evolution and Paradox is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Paradox Interactive AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradox Interactive and Evolution 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 AB are associated (or correlated) with Paradox Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradox Interactive has no effect on the direction of Evolution i.e., Evolution and Paradox Interactive go up and down completely randomly.

Pair Corralation between Evolution and Paradox Interactive

Assuming the 90 days trading horizon Evolution AB is expected to generate 1.44 times more return on investment than Paradox Interactive. However, Evolution is 1.44 times more volatile than Paradox Interactive AB. It trades about 0.05 of its potential returns per unit of risk. Paradox Interactive AB is currently generating about 0.03 per unit of risk. If you would invest  78,065  in Evolution AB on April 22, 2025 and sell it today you would earn a total of  5,935  from holding Evolution AB or generate 7.6% return on investment over 90 days.

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

Evolution AB  vs.  Paradox Interactive AB

Evolution AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Evolution may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Paradox Interactive

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paradox Interactive AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Paradox Interactive is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Evolution and Paradox Interactive

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

The idea behind Evolution AB and Paradox Interactive AB 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..