Correlation Between Evergreen Corp and FEC Resources

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

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

Diversification Opportunities for Evergreen Corp and FEC Resources

-0.55

Correlation Coefficient

Evergreen Corp  FEC Resources

Excellent diversification

The 3 months correlation between Evergreen and FEC is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Corp and FEC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEC Resources and Evergreen Corp 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 Evergreen Corp are associated (or correlated) with FEC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEC Resources has no effect on the direction of Evergreen Corp i.e., Evergreen Corp and FEC Resources go up and down completely randomly.

Pair Corralation between Evergreen Corp and FEC Resources

Given the investment horizon of 90 days Evergreen Corp is expected to generate 41.61 times less return on investment than FEC Resources. But when comparing it to its historical volatility, Evergreen Corp is 113.34 times less risky than FEC Resources. It trades about 0.42 of its potential returns per unit of risk. FEC Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.21  in FEC Resources on September 24, 2024 and sell it today you would earn a total of  0.06  from holding FEC Resources or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Evergreen Corp  vs.  FEC Resources

Evergreen Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Evergreen Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

FEC Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FEC Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FEC Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evergreen Corp and FEC Resources

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

The idea behind Evergreen Corp and FEC Resources 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.