Correlation Between Eva Airways and Hsin Kuang

Can any of the company-specific risk be diversified away by investing in both Eva Airways and Hsin Kuang 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 Eva Airways and Hsin Kuang into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Eva Airways and Hsin Kuang

-0.11

Correlation Coefficient

Eva Airways  Hsin Kuang

Good diversification

The 3 months correlation between Eva and Hsin is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Eva Airways Corp and Hsin Kuang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Kuang Steel and Eva Airways 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 Eva Airways Corp are associated (or correlated) with Hsin Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Kuang Steel has no effect on the direction of Eva Airways i.e., Eva Airways and Hsin Kuang go up and down completely randomly.

Pair Corralation between Eva Airways and Hsin Kuang

Assuming the 90 days trading horizon Eva Airways Corp is expected to generate 1.23 times more return on investment than Hsin Kuang. However, Eva Airways is 1.23 times more volatile than Hsin Kuang Steel. It trades about 0.38 of its potential returns per unit of risk. Hsin Kuang Steel is currently generating about -0.01 per unit of risk. If you would invest  3,115  in Eva Airways Corp on February 5, 2024 and sell it today you would earn a total of  655.00  from holding Eva Airways Corp or generate 21.03% return on investment over 90 days.

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

Eva Airways Corp  vs.  Hsin Kuang Steel

Eva Airways Corp

Risk-Adjusted Performance

12 of 100

Good

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

Hsin Kuang Steel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hsin Kuang Steel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hsin Kuang may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Eva Airways and Hsin Kuang

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

The idea behind Eva Airways Corp and Hsin Kuang Steel 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.