Correlation Between Evergreen Marine and Universal Microelectronics

Can any of the company-specific risk be diversified away by investing in both Evergreen Marine and Universal Microelectronics 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 Universal Microelectronics 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 Universal Microelectronics Co, you can compare the effects of market volatilities on Evergreen Marine and Universal Microelectronics 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 Universal Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen Marine and Universal Microelectronics.

Diversification Opportunities for Evergreen Marine and Universal Microelectronics

0.82

Correlation Coefficient

Evergreen Marine  Universal Microelectronics

Very poor diversification

The 3 months correlation between Evergreen and Universal is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics 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 Universal Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Microelectronics has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Universal Microelectronics go up and down completely randomly.

Pair Corralation between Evergreen Marine and Universal Microelectronics

Assuming the 90 days trading horizon Evergreen Marine is expected to generate 1.3 times less return on investment than Universal Microelectronics. But when comparing it to its historical volatility, Evergreen Marine Corp is 1.41 times less risky than Universal Microelectronics. It trades about 0.15 of its potential returns per unit of risk. Universal Microelectronics Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,010  in Universal Microelectronics Co on September 4, 2024 and sell it today you would earn a total of  615.00  from holding Universal Microelectronics Co or generate 30.6% return on investment over 90 days.

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

Evergreen Marine Corp  vs.  Universal Microelectronics Co

Evergreen Marine Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Marine Corp are ranked lower than 12 (%) 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.

Universal Microelectronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Microelectronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Universal Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evergreen Marine and Universal Microelectronics

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

The idea behind Evergreen Marine Corp and Universal Microelectronics Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.