Correlation Between Lemtech Holdings and Evergreen Steel

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

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

Diversification Opportunities for Lemtech Holdings and Evergreen Steel

-0.53

Correlation Coefficient

Lemtech Holdings  Evergreen Steel

Excellent diversification

The 3 months correlation between Lemtech and Evergreen is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lemtech Holdings Co and Evergreen Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen Steel Corp and Lemtech Holdings 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 Lemtech Holdings Co are associated (or correlated) with Evergreen Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen Steel Corp has no effect on the direction of Lemtech Holdings i.e., Lemtech Holdings and Evergreen Steel go up and down completely randomly.

Pair Corralation between Lemtech Holdings and Evergreen Steel

Assuming the 90 days trading horizon Lemtech Holdings Co is expected to generate 1.47 times more return on investment than Evergreen Steel. However, Lemtech Holdings is 1.47 times more volatile than Evergreen Steel Corp. It trades about 0.14 of its potential returns per unit of risk. Evergreen Steel Corp is currently generating about -0.1 per unit of risk. If you would invest  10,081  in Lemtech Holdings Co on September 18, 2024 and sell it today you would earn a total of  2,069  from holding Lemtech Holdings Co or generate 20.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lemtech Holdings Co  vs.  Evergreen Steel Corp

Lemtech Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lemtech Holdings Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lemtech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Evergreen Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evergreen Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lemtech Holdings and Evergreen Steel

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

The idea behind Lemtech Holdings Co and Evergreen Steel 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.