Correlation Between Evergreen Steel and Farglory Life

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

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

Diversification Opportunities for Evergreen Steel and Farglory Life

0.88

Correlation Coefficient

Evergreen Steel  Farglory Life

Very poor diversification

The 3 months correlation between Evergreen and Farglory is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Evergreen Steel Corp and Farglory Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Life Insurance and Evergreen Steel 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 Steel Corp are associated (or correlated) with Farglory Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Life Insurance has no effect on the direction of Evergreen Steel i.e., Evergreen Steel and Farglory Life go up and down completely randomly.

Pair Corralation between Evergreen Steel and Farglory Life

Assuming the 90 days trading horizon Evergreen Steel Corp is expected to generate 1.96 times more return on investment than Farglory Life. However, Evergreen Steel is 1.96 times more volatile than Farglory Life Insurance. It trades about 0.2 of its potential returns per unit of risk. Farglory Life Insurance is currently generating about 0.31 per unit of risk. If you would invest  12,200  in Evergreen Steel Corp on February 8, 2024 and sell it today you would earn a total of  2,700  from holding Evergreen Steel Corp or generate 22.13% return on investment over 90 days.

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

Evergreen Steel Corp  vs.  Farglory Life Insurance

Evergreen Steel Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Evergreen Steel Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Evergreen Steel showed solid returns over the last few months and may actually be approaching a breakup point.

Farglory Life Insurance

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Life Insurance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evergreen Steel and Farglory Life

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

The idea behind Evergreen Steel Corp and Farglory Life Insurance 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.