Correlation Between Evergreen Steel and Chumpower Machinery

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

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

Diversification Opportunities for Evergreen Steel and Chumpower Machinery

0.64

Correlation Coefficient

Evergreen Steel  Chumpower Machinery

Poor diversification

The 3 months correlation between Evergreen and Chumpower is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Steel Corp and Chumpower Machinery Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chumpower Machinery Corp and Evergreen Steel 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 Steel Corp are associated (or correlated) with Chumpower Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chumpower Machinery Corp has no effect on the direction of Evergreen Steel i.e., Evergreen Steel and Chumpower Machinery go up and down completely randomly.

Pair Corralation between Evergreen Steel and Chumpower Machinery

Assuming the 90 days trading horizon Evergreen Steel Corp is expected to under-perform the Chumpower Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Evergreen Steel Corp is 1.07 times less risky than Chumpower Machinery. The stock trades about -0.12 of its potential returns per unit of risk. The Chumpower Machinery Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,300  in Chumpower Machinery Corp on September 19, 2024 and sell it today you would lose (120.00) from holding Chumpower Machinery Corp or give up 5.22% of portfolio value over 90 days.

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

Evergreen Steel Corp  vs.  Chumpower Machinery Corp

Evergreen Steel Corp

Risk-Adjusted Performance

0 of 100

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Chumpower Machinery Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chumpower Machinery Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chumpower Machinery 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 Evergreen Steel and Chumpower Machinery

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

The idea behind Evergreen Steel Corp and Chumpower Machinery 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 CEOs Directory module to screen CEOs from public companies around the world.