Correlation Between Evergreen Marine and Cheng Mei

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

Diversification Opportunities for Evergreen Marine and Cheng Mei

-0.55

Correlation Coefficient

Evergreen Marine  Cheng Mei

Excellent diversification

The 3 months correlation between Evergreen and Cheng is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials 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 Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Cheng Mei go up and down completely randomly.

Pair Corralation between Evergreen Marine and Cheng Mei

Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 1.73 times more return on investment than Cheng Mei. However, Evergreen Marine is 1.73 times more volatile than Cheng Mei Materials. It trades about 0.13 of its potential returns per unit of risk. Cheng Mei Materials is currently generating about -0.07 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	Very Weak
Accuracy	98.41%
Values	Daily Returns

Evergreen Marine Corp  vs.  Cheng Mei Materials

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.

Cheng Mei Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheng Mei Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Evergreen Marine and Cheng Mei

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

The idea behind Evergreen Marine Corp and Cheng Mei Materials 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.