Correlation Between Evergreen Marine and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Evergreen Marine and Cathay Financial 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 Cathay Financial 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 Cathay Financial Holding, you can compare the effects of market volatilities on Evergreen Marine and Cathay Financial 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 Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen Marine and Cathay Financial.
Diversification Opportunities for Evergreen Marine and Cathay Financial
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Evergreen and Cathay is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Cathay Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Financial Holding 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 Cathay Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Financial Holding has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Cathay Financial go up and down completely randomly.
Pair Corralation between Evergreen Marine and Cathay Financial
Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 1.81 times more return on investment than Cathay Financial. However, Evergreen Marine is 1.81 times more volatile than Cathay Financial Holding. It trades about 0.08 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.07 per unit of risk. If you would invest 8,610 in Evergreen Marine Corp on October 25, 2024 and sell it today you would earn a total of 11,840 from holding Evergreen Marine Corp or generate 137.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evergreen Marine Corp vs. Cathay Financial Holding
Performance |
| Timeline |
| Evergreen Marine Corp |
| Cathay Financial Holding |
Evergreen Marine and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evergreen Marine and Cathay Financial
The main advantage of trading using opposite Evergreen Marine and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evergreen Marine position performs unexpectedly, Cathay Financial 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 Cathay Financial will offset losses from the drop in Cathay Financial's long position.| Evergreen Marine vs. Yang Ming Marine | Evergreen Marine vs. Wan Hai Lines | Evergreen Marine vs. Eva Airways Corp | Evergreen Marine vs. China Airlines |
| Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Mega Financial Holding | Cathay Financial vs. First Financial Holding |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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