Correlation Between Chicony Electronics and Evergreen Steel

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

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

Diversification Opportunities for Chicony Electronics and Evergreen Steel

0.46

Correlation Coefficient

Chicony Electronics  Evergreen Steel

Very weak diversification

The 3 months correlation between Chicony and Evergreen is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chicony Electronics Co 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 Chicony Electronics 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 Chicony Electronics Co 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 Chicony Electronics i.e., Chicony Electronics and Evergreen Steel go up and down completely randomly.

Pair Corralation between Chicony Electronics and Evergreen Steel

Assuming the 90 days trading horizon Chicony Electronics Co is expected to under-perform the Evergreen Steel. But the stock apears to be less risky and, when comparing its historical volatility, Chicony Electronics Co is 1.02 times less risky than Evergreen Steel. The stock trades about -0.04 of its potential returns per unit of risk. The Evergreen Steel Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Chicony Electronics Co  vs.  Evergreen Steel Corp

Chicony Electronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chicony Electronics Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chicony Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Chicony Electronics and Evergreen Steel

The main advantage of trading using opposite Chicony Electronics and Evergreen Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chicony Electronics 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 Chicony Electronics Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..