Correlation Between Evergreen Marine and Wah Hong

Can any of the company-specific risk be diversified away by investing in both Evergreen Marine and Wah Hong 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 Wah Hong 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 Wah Hong Industrial, you can compare the effects of market volatilities on Evergreen Marine and Wah Hong 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 Wah Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergreen Marine and Wah Hong.

Diversification Opportunities for Evergreen Marine and Wah Hong

0.6

Correlation Coefficient

Evergreen Marine  Wah Hong

Poor diversification

The 3 months correlation between Evergreen and Wah is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Wah Hong Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Hong Industrial 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 Wah Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Hong Industrial has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Wah Hong go up and down completely randomly.

Pair Corralation between Evergreen Marine and Wah Hong

Assuming the 90 days trading horizon Evergreen Marine is expected to generate 2.01 times less return on investment than Wah Hong. But when comparing it to its historical volatility, Evergreen Marine Corp is 1.73 times less risky than Wah Hong. It trades about 0.08 of its potential returns per unit of risk. Wah Hong Industrial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,675  in Wah Hong Industrial on September 25, 2024 and sell it today you would earn a total of  760.00  from holding Wah Hong Industrial or generate 20.68% return on investment over 90 days.

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

Evergreen Marine Corp  vs.  Wah Hong Industrial

Evergreen Marine Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Marine Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Evergreen Marine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wah Hong Industrial

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wah Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evergreen Marine and Wah Hong

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

The idea behind Evergreen Marine Corp and Wah Hong Industrial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.