Correlation Between Evergreen Marine and China Petrochemical
Can any of the company-specific risk be diversified away by investing in both Evergreen Marine and China Petrochemical 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 China Petrochemical 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 China Petrochemical Development, you can compare the effects of market volatilities on Evergreen Marine and China Petrochemical 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 China Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen Marine and China Petrochemical.
Diversification Opportunities for Evergreen Marine and China Petrochemical
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Evergreen and China is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical 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 China Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petrochemical has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and China Petrochemical go up and down completely randomly.
Pair Corralation between Evergreen Marine and China Petrochemical
Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 1.75 times more return on investment than China Petrochemical. However, Evergreen Marine is 1.75 times more volatile than China Petrochemical Development. It trades about 0.1 of its potential returns per unit of risk. China Petrochemical Development is currently generating about -0.03 per unit of risk. If you would invest 8,719 in Evergreen Marine Corp on August 25, 2024 and sell it today you would earn a total of 14,881 from holding Evergreen Marine Corp or generate 170.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evergreen Marine Corp vs. China Petrochemical Developmen
Performance |
| Timeline |
| Evergreen Marine Corp |
| China Petrochemical |
Evergreen Marine and China Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evergreen Marine and China Petrochemical
The main advantage of trading using opposite Evergreen Marine and China Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evergreen Marine position performs unexpectedly, China Petrochemical 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 China Petrochemical will offset losses from the drop in China Petrochemical's 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 |
| China Petrochemical vs. USI Corp | China Petrochemical vs. Grand Pacific Petrochemical | China Petrochemical vs. Taiwan Styrene Monomer | China Petrochemical vs. China Steel 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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