Correlation Between EBEST Investment and Lake Materials

Can any of the company-specific risk be diversified away by investing in both EBEST Investment and Lake Materials 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 EBEST Investment and Lake Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EBEST Investment Securities and Lake Materials Co, you can compare the effects of market volatilities on EBEST Investment and Lake Materials 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 EBEST Investment with a short position of Lake Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBEST Investment and Lake Materials.

Diversification Opportunities for EBEST Investment and Lake Materials

0.88

Correlation Coefficient

EBEST Investment  Lake Materials

Very poor diversification

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

Pair Corralation between EBEST Investment and Lake Materials

Assuming the 90 days trading horizon EBEST Investment Securities is expected to generate 0.43 times more return on investment than Lake Materials. However, EBEST Investment Securities is 2.34 times less risky than Lake Materials. It trades about -0.19 of its potential returns per unit of risk. Lake Materials Co is currently generating about -0.21 per unit of risk. If you would invest  464,000  in EBEST Investment Securities on September 4, 2024 and sell it today you would lose (64,000) from holding EBEST Investment Securities or give up 13.79% of portfolio value over 90 days.

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

EBEST Investment Securities  vs.  Lake Materials Co

EBEST Investment Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EBEST Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lake Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with EBEST Investment and Lake Materials

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

The idea behind EBEST Investment Securities and Lake Materials 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.