Correlation Between Fine Besteel and Eagon Industrial

Can any of the company-specific risk be diversified away by investing in both Fine Besteel and Eagon Industrial 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 Fine Besteel and Eagon Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Fine Besteel and Eagon Industrial

-0.03

Correlation Coefficient

Fine Besteel  Eagon Industrial

Good diversification

The 3 months correlation between Fine and Eagon is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fine Besteel Co and Eagon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagon Industrial and Fine Besteel 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 Fine Besteel Co are associated (or correlated) with Eagon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagon Industrial has no effect on the direction of Fine Besteel i.e., Fine Besteel and Eagon Industrial go up and down completely randomly.

Pair Corralation between Fine Besteel and Eagon Industrial

Assuming the 90 days trading horizon Fine Besteel Co is expected to under-perform the Eagon Industrial. In addition to that, Fine Besteel is 1.3 times more volatile than Eagon Industrial Co. It trades about -0.03 of its total potential returns per unit of risk. Eagon Industrial Co is currently generating about -0.02 per unit of volatility. If you would invest  769,830  in Eagon Industrial Co on October 24, 2024 and sell it today you would lose (196,830) from holding Eagon Industrial Co or give up 25.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Fine Besteel Co  vs.  Eagon Industrial Co

Fine Besteel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fine Besteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Eagon Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eagon Industrial Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eagon Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fine Besteel and Eagon Industrial

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

The idea behind Fine Besteel Co and Eagon Industrial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.