Correlation Between Wah Hong and Evergreen Marine

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

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

Diversification Opportunities for Wah Hong and Evergreen Marine

0.6

Correlation Coefficient

Wah Hong  Evergreen Marine

Poor diversification

The 3 months correlation between Wah and Evergreen is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and Evergreen Marine Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen Marine Corp and Wah Hong 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 Wah Hong Industrial are associated (or correlated) with Evergreen Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen Marine Corp has no effect on the direction of Wah Hong i.e., Wah Hong and Evergreen Marine go up and down completely randomly.

Pair Corralation between Wah Hong and Evergreen Marine

Assuming the 90 days trading horizon Wah Hong Industrial is expected to under-perform the Evergreen Marine. In addition to that, Wah Hong is 1.6 times more volatile than Evergreen Marine Corp. It trades about -0.11 of its total potential returns per unit of risk. Evergreen Marine Corp is currently generating about 0.05 per unit of volatility. If you would invest  22,800  in Evergreen Marine Corp on September 25, 2024 and sell it today you would earn a total of  400.00  from holding Evergreen Marine Corp or generate 1.75% return on investment over 90 days.

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

Wah Hong Industrial  vs.  Evergreen Marine Corp

Wah Hong Industrial

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wah Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Evergreen Marine Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Marine Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Evergreen Marine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wah Hong and Evergreen Marine

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

The idea behind Wah Hong Industrial and Evergreen Marine 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.