Correlation Between Evergreen Marine and TCI

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

Diversification Opportunities for Evergreen Marine and TCI

0.63

Correlation Coefficient

Evergreen Marine  TCI

Poor diversification

The 3 months correlation between Evergreen and TCI is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Marine Corp and TCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCI Co 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 TCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCI Co has no effect on the direction of Evergreen Marine i.e., Evergreen Marine and TCI go up and down completely randomly.

Pair Corralation between Evergreen Marine and TCI

Assuming the 90 days trading horizon Evergreen Marine is expected to generate 2.91 times less return on investment than TCI. But when comparing it to its historical volatility, Evergreen Marine Corp is 1.71 times less risky than TCI. It trades about 0.2 of its potential returns per unit of risk. TCI Co is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  11,550  in TCI Co on December 4, 2024 and sell it today you would earn a total of  2,950  from holding TCI Co or generate 25.54% 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.  TCI Co

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.

TCI Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TCI Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TCI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evergreen Marine and TCI

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

The idea behind Evergreen Marine Corp and TCI Co 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.