Correlation Between Evergreen Marine and Wan Hai
Can any of the company-specific risk be diversified away by investing in both Evergreen Marine and Wan Hai 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 Wan Hai 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 Wan Hai Lines, you can compare the effects of market volatilities on Evergreen Marine and Wan Hai 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 Wan Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen Marine and Wan Hai.
Diversification Opportunities for Evergreen Marine and Wan Hai
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Evergreen and Wan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Wan Hai Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wan Hai Lines 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 Wan Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wan Hai Lines has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Wan Hai go up and down completely randomly.
Pair Corralation between Evergreen Marine and Wan Hai
Assuming the 90 days trading horizon Evergreen Marine is expected to generate 2.51 times less return on investment than Wan Hai. But when comparing it to its historical volatility, Evergreen Marine Corp is 1.46 times less risky than Wan Hai. It trades about 0.02 of its potential returns per unit of risk. Wan Hai Lines is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,970 in Wan Hai Lines on August 29, 2024 and sell it today you would earn a total of 480.00 from holding Wan Hai Lines or generate 6.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evergreen Marine Corp vs. Wan Hai Lines
Performance |
| Timeline |
| Evergreen Marine Corp |
| Wan Hai Lines |
Evergreen Marine and Wan Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evergreen Marine and Wan Hai
The main advantage of trading using opposite Evergreen Marine and Wan Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evergreen Marine position performs unexpectedly, Wan Hai 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 Wan Hai will offset losses from the drop in Wan Hai's long position.| Evergreen Marine vs. Yulon Motor Co | Evergreen Marine vs. Far Eastern Department | Evergreen Marine vs. China Steel Corp | Evergreen Marine vs. Chang Hwa Commercial |
| Wan Hai vs. Yulon Motor Co | Wan Hai vs. Far Eastern Department | Wan Hai vs. China Steel Corp | Wan Hai vs. Chang Hwa Commercial |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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