Correlation Between Evergreen Marine and Shining Building

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

Diversification Opportunities for Evergreen Marine and Shining Building

0.7

Correlation Coefficient

Evergreen Marine  Shining Building

Poor diversification

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

Pair Corralation between Evergreen Marine and Shining Building

Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 1.18 times more return on investment than Shining Building. However, Evergreen Marine is 1.18 times more volatile than Shining Building Business. It trades about 0.15 of its potential returns per unit of risk. Shining Building Business is currently generating about 0.1 per unit of risk. If you would invest  17,850  in Evergreen Marine Corp on September 4, 2024 and sell it today you would earn a total of  4,250  from holding Evergreen Marine Corp or generate 23.81% return on investment over 90 days.

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

Evergreen Marine Corp  vs.  Shining Building Business

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.

Shining Building Business

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shining Building Business are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shining Building showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evergreen Marine and Shining Building

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

The idea behind Evergreen Marine Corp and Shining Building Business 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.