Correlation Between Evergreen Marine and Kenmec Mechanical
Can any of the company-specific risk be diversified away by investing in both Evergreen Marine and Kenmec Mechanical 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 Kenmec Mechanical 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 Kenmec Mechanical Engineering, you can compare the effects of market volatilities on Evergreen Marine and Kenmec Mechanical 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 Kenmec Mechanical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen Marine and Kenmec Mechanical.
Diversification Opportunities for Evergreen Marine and Kenmec Mechanical
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Evergreen and Kenmec is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Kenmec Mechanical Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenmec Mechanical 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 Kenmec Mechanical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenmec Mechanical has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Kenmec Mechanical go up and down completely randomly.
Pair Corralation between Evergreen Marine and Kenmec Mechanical
Assuming the 90 days trading horizon Evergreen Marine Corp is expected to generate 1.03 times more return on investment than Kenmec Mechanical. However, Evergreen Marine is 1.03 times more volatile than Kenmec Mechanical Engineering. It trades about 0.06 of its potential returns per unit of risk. Kenmec Mechanical Engineering is currently generating about -0.03 per unit of risk. If you would invest 18,200 in Evergreen Marine Corp on November 2, 2024 and sell it today you would earn a total of 2,250 from holding Evergreen Marine Corp or generate 12.36% 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. Kenmec Mechanical Engineering
Performance |
| Timeline |
| Evergreen Marine Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Kenmec Mechanical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Evergreen Marine and Kenmec Mechanical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evergreen Marine and Kenmec Mechanical
The main advantage of trading using opposite Evergreen Marine and Kenmec Mechanical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evergreen Marine position performs unexpectedly, Kenmec Mechanical 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 Kenmec Mechanical will offset losses from the drop in Kenmec Mechanical's long position.The idea behind Evergreen Marine Corp and Kenmec Mechanical Engineering 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.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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