Correlation Between Evergreen Corp and Western Acquisition

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

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

Diversification Opportunities for Evergreen Corp and Western Acquisition

0.94

Correlation Coefficient

Evergreen Corp  Western Acquisition

Almost no diversification

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

Pair Corralation between Evergreen Corp and Western Acquisition

Given the investment horizon of 90 days Evergreen Corp is expected to generate 4.7 times less return on investment than Western Acquisition. But when comparing it to its historical volatility, Evergreen Corp is 6.28 times less risky than Western Acquisition. It trades about 0.23 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,075  in Western Acquisition Ventures on August 31, 2024 and sell it today you would earn a total of  79.00  from holding Western Acquisition Ventures or generate 7.35% return on investment over 90 days.

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

Evergreen Corp  vs.  Western Acquisition Ventures

Evergreen Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Evergreen Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Western Acquisition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Western Acquisition may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Evergreen Corp and Western Acquisition

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

The idea behind Evergreen Corp and Western Acquisition Ventures 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.