Correlation Between China Galaxy and Evercore Partners

Can any of the company-specific risk be diversified away by investing in both China Galaxy and Evercore Partners 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 China Galaxy and Evercore Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Galaxy Securities and Evercore Partners, you can compare the effects of market volatilities on China Galaxy and Evercore Partners 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 China Galaxy with a short position of Evercore Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Galaxy and Evercore Partners.

Diversification Opportunities for China Galaxy and Evercore Partners

0.87

Correlation Coefficient

China Galaxy  Evercore Partners

Very poor diversification

The 3 months correlation between China and Evercore is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding China Galaxy Securities and Evercore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evercore Partners and China Galaxy 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 China Galaxy Securities are associated (or correlated) with Evercore Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evercore Partners has no effect on the direction of China Galaxy i.e., China Galaxy and Evercore Partners go up and down completely randomly.

Pair Corralation between China Galaxy and Evercore Partners

Assuming the 90 days horizon China Galaxy is expected to generate 5.67 times less return on investment than Evercore Partners. In addition to that, China Galaxy is 1.09 times more volatile than Evercore Partners. It trades about 0.02 of its total potential returns per unit of risk. Evercore Partners is currently generating about 0.12 per unit of volatility. If you would invest  10,654  in Evercore Partners on September 3, 2024 and sell it today you would earn a total of  20,136  from holding Evercore Partners or generate 189.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	81.21%
Values	Daily Returns

China Galaxy Securities  vs.  Evercore Partners

China Galaxy Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Galaxy Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, China Galaxy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Evercore Partners

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evercore Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Evercore Partners reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Galaxy and Evercore Partners

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

The idea behind China Galaxy Securities and Evercore Partners 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.