Correlation Between Evergreen Marine and China Airlines

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

Diversification Opportunities for Evergreen Marine and China Airlines

0.94

Correlation Coefficient

Evergreen Marine  China Airlines

Almost no diversification

The 3 months correlation between Evergreen and China is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and China Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Airlines 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 China Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Airlines has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and China Airlines go up and down completely randomly.

Pair Corralation between Evergreen Marine and China Airlines

Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 1.86 times more return on investment than China Airlines. However, Evergreen Marine is 1.86 times more volatile than China Airlines. It trades about 0.13 of its potential returns per unit of risk. China Airlines is currently generating about 0.21 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 Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Evergreen Marine Corp  vs.  China Airlines

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.

China Airlines

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Airlines are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evergreen Marine and China Airlines

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

The idea behind Evergreen Marine Corp and China Airlines 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.