Correlation Between Cheng Uei and Evergreen Marine

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

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

Diversification Opportunities for Cheng Uei and Evergreen Marine

0.77

Correlation Coefficient

Cheng Uei  Evergreen Marine

Poor diversification

The 3 months correlation between Cheng and Evergreen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Uei Precision and Evergreen Marine Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen Marine Corp and Cheng Uei 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 Cheng Uei Precision are associated (or correlated) with Evergreen Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen Marine Corp has no effect on the direction of Cheng Uei i.e., Cheng Uei and Evergreen Marine go up and down completely randomly.

Pair Corralation between Cheng Uei and Evergreen Marine

Assuming the 90 days trading horizon Cheng Uei is expected to generate 1.68 times less return on investment than Evergreen Marine. In addition to that, Cheng Uei is 1.72 times more volatile than Evergreen Marine Corp. It trades about 0.06 of its total potential returns per unit of risk. Evergreen Marine Corp is currently generating about 0.18 per unit of volatility. If you would invest  18,800  in Evergreen Marine Corp on October 7, 2024 and sell it today you would earn a total of  4,350  from holding Evergreen Marine Corp or generate 23.14% return on investment over 90 days.

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

Cheng Uei Precision  vs.  Evergreen Marine Corp

Cheng Uei Precision

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Uei Precision are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Cheng Uei showed solid returns over the last few months and may actually be approaching a breakup point.

Evergreen Marine Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Marine Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Evergreen Marine showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheng Uei and Evergreen Marine

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

The idea behind Cheng Uei Precision and Evergreen Marine 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.