Correlation Between Evergreen Marine and Hsin Kuang

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

By analyzing existing cross correlation between Evergreen Marine Corp and Hsin Kuang Steel, you can compare the effects of market volatilities on Evergreen Marine and Hsin Kuang 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 Evergreen Marine with a short position of Hsin Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen Marine and Hsin Kuang.

Diversification Opportunities for Evergreen Marine and Hsin Kuang

-0.7

Correlation Coefficient

Evergreen Marine  Hsin Kuang

Excellent diversification

The 3 months correlation between Evergreen and Hsin is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Hsin Kuang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Kuang Steel and Evergreen Marine 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 Evergreen Marine Corp are associated (or correlated) with Hsin Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Kuang Steel has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Hsin Kuang go up and down completely randomly.

Pair Corralation between Evergreen Marine and Hsin Kuang

Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 1.61 times more return on investment than Hsin Kuang. However, Evergreen Marine is 1.61 times more volatile than Hsin Kuang Steel. It trades about 0.13 of its potential returns per unit of risk. Hsin Kuang Steel is currently generating about -0.18 per unit of risk. If you would invest  18,200  in Evergreen Marine Corp on August 31, 2024 and sell it today you would earn a total of  3,500  from holding Evergreen Marine Corp or generate 19.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Evergreen Marine Corp  vs.  Hsin Kuang Steel

Evergreen Marine Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Marine Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Evergreen Marine showed solid returns over the last few months and may actually be approaching a breakup point.

Hsin Kuang Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hsin Kuang Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Evergreen Marine and Hsin Kuang

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

The idea behind Evergreen Marine Corp and Hsin Kuang Steel 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.