Correlation Between Andon Health and Eastern Communications

Can any of the company-specific risk be diversified away by investing in both Andon Health and Eastern Communications 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 Andon Health and Eastern Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Andon Health Co and Eastern Communications Co, you can compare the effects of market volatilities on Andon Health and Eastern Communications 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 Andon Health with a short position of Eastern Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andon Health and Eastern Communications.

Diversification Opportunities for Andon Health and Eastern Communications

0.67

Correlation Coefficient

Andon Health  Eastern Communications

Poor diversification

The 3 months correlation between Andon and Eastern is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Andon Health Co and Eastern Communications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Communications and Andon Health 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 Andon Health Co are associated (or correlated) with Eastern Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Communications has no effect on the direction of Andon Health i.e., Andon Health and Eastern Communications go up and down completely randomly.

Pair Corralation between Andon Health and Eastern Communications

Assuming the 90 days trading horizon Andon Health Co is expected to generate 1.01 times more return on investment than Eastern Communications. However, Andon Health is 1.01 times more volatile than Eastern Communications Co. It trades about 0.15 of its potential returns per unit of risk. Eastern Communications Co is currently generating about 0.07 per unit of risk. If you would invest  3,947  in Andon Health Co on December 4, 2024 and sell it today you would earn a total of  242.00  from holding Andon Health Co or generate 6.13% return on investment over 90 days.

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

Andon Health Co  vs.  Eastern Communications Co

Andon Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Andon Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Andon Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eastern Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Communications Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eastern Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Andon Health and Eastern Communications

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

The idea behind Andon Health Co and Eastern Communications Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.