Correlation Between Evergreen Marine and Phison Electronics

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

Diversification Opportunities for Evergreen Marine and Phison Electronics

-0.03

Correlation Coefficient

Evergreen Marine  Phison Electronics

Good diversification

The 3 months correlation between Evergreen and Phison is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and Phison Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phison Electronics 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 Phison Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phison Electronics has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and Phison Electronics go up and down completely randomly.

Pair Corralation between Evergreen Marine and Phison Electronics

Assuming the 90 days trading horizon Evergreen Marine Corp is expected to under-perform the Phison Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Evergreen Marine Corp is 1.25 times less risky than Phison Electronics. The stock trades about -0.03 of its potential returns per unit of risk. The Phison Electronics is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  44,037  in Phison Electronics on December 4, 2024 and sell it today you would earn a total of  11,163  from holding Phison Electronics or generate 25.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Evergreen Marine Corp  vs.  Phison Electronics

Evergreen Marine Corp

Risk-Adjusted Performance

Very Weak

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

Phison Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phison Electronics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Phison Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evergreen Marine and Phison Electronics

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

The idea behind Evergreen Marine Corp and Phison Electronics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.