Correlation Between Evergreen Marine and Formosa Plastics
Can any of the company-specific risk be diversified away by investing in both Evergreen Marine and Formosa Plastics 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 Formosa Plastics 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 Formosa Plastics Corp, you can compare the effects of market volatilities on Evergreen Marine and Formosa Plastics 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 Formosa Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen Marine and Formosa Plastics.
Diversification Opportunities for Evergreen Marine and Formosa Plastics
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Evergreen and Formosa is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Formosa Plastics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Plastics Corp 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 Formosa Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Plastics Corp has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Formosa Plastics go up and down completely randomly.
Pair Corralation between Evergreen Marine and Formosa Plastics
Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 0.76 times more return on investment than Formosa Plastics. However, Evergreen Marine Corp is 1.31 times less risky than Formosa Plastics. It trades about 0.38 of its potential returns per unit of risk. Formosa Plastics Corp is currently generating about -0.08 per unit of risk. If you would invest 20,550 in Evergreen Marine Corp on August 24, 2024 and sell it today you would earn a total of 3,350 from holding Evergreen Marine Corp or generate 16.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evergreen Marine Corp vs. Formosa Plastics Corp
Performance |
| Timeline |
| Evergreen Marine Corp |
| Formosa Plastics Corp |
Evergreen Marine and Formosa Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evergreen Marine and Formosa Plastics
The main advantage of trading using opposite Evergreen Marine and Formosa Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evergreen Marine position performs unexpectedly, Formosa Plastics 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 Formosa Plastics will offset losses from the drop in Formosa Plastics' long position.| Evergreen Marine vs. Sunny Friend Environmental | Evergreen Marine vs. Taiwan Secom Co | Evergreen Marine vs. TTET Union Corp | Evergreen Marine vs. ECOVE Environment Corp |
| Formosa Plastics vs. Nan Ya Plastics | Formosa Plastics vs. Formosa Chemicals Fibre | Formosa Plastics vs. China Steel Corp | Formosa Plastics vs. Formosa Petrochemical Corp |
Check out your portfolio center.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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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