Correlation Between Wan Hai and Evergreen International

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

By analyzing existing cross correlation between Wan Hai Lines and Evergreen International Storage, you can compare the effects of market volatilities on Wan Hai and Evergreen International 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 Wan Hai with a short position of Evergreen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and Evergreen International.

Diversification Opportunities for Wan Hai and Evergreen International

0.63

Correlation Coefficient

Wan Hai  Evergreen International

Poor diversification

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

Pair Corralation between Wan Hai and Evergreen International

Assuming the 90 days trading horizon Wan Hai Lines is expected to generate 2.36 times more return on investment than Evergreen International. However, Wan Hai is 2.36 times more volatile than Evergreen International Storage. It trades about -0.01 of its potential returns per unit of risk. Evergreen International Storage is currently generating about -0.03 per unit of risk. If you would invest  8,630  in Wan Hai Lines on December 4, 2024 and sell it today you would lose (170.00) from holding Wan Hai Lines or give up 1.97% of portfolio value over 90 days.

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

Wan Hai Lines  vs.  Evergreen International Storag

Wan Hai Lines

Risk-Adjusted Performance

Very Weak

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

Evergreen International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evergreen International Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Evergreen International 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 Wan Hai and Evergreen International

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

The idea behind Wan Hai Lines and Evergreen International Storage 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.