Correlation Between Evergreen Marine and MedFirst Healthcare

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

Diversification Opportunities for Evergreen Marine and MedFirst Healthcare

-0.85

Correlation Coefficient

Evergreen Marine  MedFirst Healthcare

Pay attention - limited upside

The 3 months correlation between Evergreen and MedFirst is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and MedFirst Healthcare Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedFirst Healthcare 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 MedFirst Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedFirst Healthcare has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and MedFirst Healthcare go up and down completely randomly.

Pair Corralation between Evergreen Marine and MedFirst Healthcare

Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 1.28 times more return on investment than MedFirst Healthcare. However, Evergreen Marine is 1.28 times more volatile than MedFirst Healthcare Services. It trades about 0.09 of its potential returns per unit of risk. MedFirst Healthcare Services is currently generating about 0.01 per unit of risk. If you would invest  8,473  in Evergreen Marine Corp on September 2, 2024 and sell it today you would earn a total of  13,227  from holding Evergreen Marine Corp or generate 156.11% return on investment over 90 days.

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

Evergreen Marine Corp  vs.  MedFirst Healthcare Services

Evergreen Marine Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Marine Corp are ranked lower than 9 (%) 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.

MedFirst Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MedFirst Healthcare Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, MedFirst Healthcare is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Evergreen Marine and MedFirst Healthcare

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

The idea behind Evergreen Marine Corp and MedFirst Healthcare Services 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.