Correlation Between Waffer Technology and Evergreen Steel

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

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

Diversification Opportunities for Waffer Technology and Evergreen Steel

0.67

Correlation Coefficient

Waffer Technology  Evergreen Steel

Poor diversification

The 3 months correlation between Waffer and Evergreen is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Waffer Technology Corp 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 Waffer Technology 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 Waffer Technology Corp 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 Waffer Technology i.e., Waffer Technology and Evergreen Steel go up and down completely randomly.

Pair Corralation between Waffer Technology and Evergreen Steel

Assuming the 90 days trading horizon Waffer Technology Corp is expected to generate 1.66 times more return on investment than Evergreen Steel. However, Waffer Technology is 1.66 times more volatile than Evergreen Steel Corp. It trades about 0.19 of its potential returns per unit of risk. Evergreen Steel Corp is currently generating about 0.24 per unit of risk. If you would invest  5,990  in Waffer Technology Corp on December 5, 2024 and sell it today you would earn a total of  540.00  from holding Waffer Technology Corp or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Waffer Technology Corp  vs.  Evergreen Steel Corp

Waffer Technology Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waffer Technology 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.

Evergreen Steel Corp

Risk-Adjusted Performance

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 fairly stable basic indicators, Evergreen Steel 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 Waffer Technology and Evergreen Steel

The main advantage of trading using opposite Waffer Technology and Evergreen Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waffer Technology 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 Waffer Technology Corp 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.