Correlation Between Yeong Guan and Evergreen Steel

Can any of the company-specific risk be diversified away by investing in both Yeong Guan and Evergreen Steel 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 Yeong Guan and Evergreen Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yeong Guan Energy and Evergreen Steel Corp, you can compare the effects of market volatilities on Yeong Guan and Evergreen Steel 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 Yeong Guan with a short position of Evergreen Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yeong Guan and Evergreen Steel.

Diversification Opportunities for Yeong Guan and Evergreen Steel

0.33

Correlation Coefficient

Yeong Guan  Evergreen Steel

Weak diversification

The 3 months correlation between Yeong and Evergreen is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Yeong Guan Energy and Evergreen Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen Steel Corp and Yeong Guan 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 Yeong Guan Energy are associated (or correlated) with Evergreen Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen Steel Corp has no effect on the direction of Yeong Guan i.e., Yeong Guan and Evergreen Steel go up and down completely randomly.

Pair Corralation between Yeong Guan and Evergreen Steel

Assuming the 90 days trading horizon Yeong Guan Energy is expected to generate 1.16 times more return on investment than Evergreen Steel. However, Yeong Guan is 1.16 times more volatile than Evergreen Steel Corp. It trades about 0.22 of its potential returns per unit of risk. Evergreen Steel Corp is currently generating about 0.24 per unit of risk. If you would invest  3,680  in Yeong Guan Energy on December 5, 2024 and sell it today you would earn a total of  250.00  from holding Yeong Guan Energy or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Yeong Guan Energy  vs.  Evergreen Steel Corp

Yeong Guan Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yeong Guan Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yeong Guan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Evergreen Steel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evergreen Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Evergreen Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Yeong Guan and Evergreen Steel

The main advantage of trading using opposite Yeong Guan and Evergreen Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yeong Guan position performs unexpectedly, Evergreen Steel 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 Evergreen Steel will offset losses from the drop in Evergreen Steel's long position.

The idea behind Yeong Guan Energy and Evergreen Steel Corp 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.