Correlation Between Evergreen International and Sunny Friend
Can any of the company-specific risk be diversified away by investing in both Evergreen International and Sunny Friend 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 International and Sunny Friend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evergreen International Storage and Sunny Friend Environmental, you can compare the effects of market volatilities on Evergreen International and Sunny Friend 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 International with a short position of Sunny Friend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen International and Sunny Friend.
Diversification Opportunities for Evergreen International and Sunny Friend
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Evergreen and Sunny is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen International Storag and Sunny Friend Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Friend Environ and Evergreen International 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 International Storage are associated (or correlated) with Sunny Friend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Friend Environ has no effect on the direction of Evergreen International i.e., Evergreen International and Sunny Friend go up and down completely randomly.
Pair Corralation between Evergreen International and Sunny Friend
Assuming the 90 days trading horizon Evergreen International Storage is expected to generate 0.71 times more return on investment than Sunny Friend. However, Evergreen International Storage is 1.41 times less risky than Sunny Friend. It trades about -0.08 of its potential returns per unit of risk. Sunny Friend Environmental is currently generating about -0.18 per unit of risk. If you would invest 3,165 in Evergreen International Storage on November 2, 2024 and sell it today you would lose (145.00) from holding Evergreen International Storage or give up 4.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evergreen International Storag vs. Sunny Friend Environmental
Performance |
| Timeline |
| Evergreen International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Sunny Friend Environ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Evergreen International and Sunny Friend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evergreen International and Sunny Friend
The main advantage of trading using opposite Evergreen International and Sunny Friend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evergreen International position performs unexpectedly, Sunny Friend 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 Sunny Friend will offset losses from the drop in Sunny Friend's long position.The idea behind Evergreen International Storage and Sunny Friend Environmental 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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