Correlation Between China Airlines and Evergreen International

Can any of the company-specific risk be diversified away by investing in both China Airlines and Evergreen International 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 China Airlines and Evergreen International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Airlines and Evergreen International Storage, you can compare the effects of market volatilities on China Airlines and Evergreen International 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 China Airlines with a short position of Evergreen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and Evergreen International.

Diversification Opportunities for China Airlines and Evergreen International

0.43

Correlation Coefficient

China Airlines  Evergreen International

Very weak diversification

The 3 months correlation between China and Evergreen is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and Evergreen International Storag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen International and China Airlines 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 China Airlines are associated (or correlated) with Evergreen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen International has no effect on the direction of China Airlines i.e., China Airlines and Evergreen International go up and down completely randomly.

Pair Corralation between China Airlines and Evergreen International

Assuming the 90 days trading horizon China Airlines is expected to generate 2.03 times more return on investment than Evergreen International. However, China Airlines is 2.03 times more volatile than Evergreen International Storage. It trades about 0.26 of its potential returns per unit of risk. Evergreen International Storage is currently generating about 0.01 per unit of risk. If you would invest  2,345  in China Airlines on September 15, 2024 and sell it today you would earn a total of  255.00  from holding China Airlines or generate 10.87% return on investment over 90 days.

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

China Airlines  vs.  Evergreen International Storag

China Airlines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Airlines are ranked lower than 19 (%) 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.

Evergreen International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evergreen International Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Evergreen International 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 China Airlines and Evergreen International

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

The idea behind China Airlines and Evergreen International Storage 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.