Correlation Between 21st Century and Eastern Silk

Can any of the company-specific risk be diversified away by investing in both 21st Century and Eastern Silk 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 21st Century and Eastern Silk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 21st Century Management and Eastern Silk Industries, you can compare the effects of market volatilities on 21st Century and Eastern Silk 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 21st Century with a short position of Eastern Silk. Check out your portfolio center. Please also check ongoing floating volatility patterns of 21st Century and Eastern Silk.

Diversification Opportunities for 21st Century and Eastern Silk

0.0

Correlation Coefficient

21st Century  Eastern Silk

Pay attention - limited upside

The 3 months correlation between 21st and Eastern is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding 21st Century Management and Eastern Silk Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Silk Industries and 21st Century 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 21st Century Management are associated (or correlated) with Eastern Silk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Silk Industries has no effect on the direction of 21st Century i.e., 21st Century and Eastern Silk go up and down completely randomly.

Pair Corralation between 21st Century and Eastern Silk

Assuming the 90 days trading horizon 21st Century Management is expected to generate 1.62 times more return on investment than Eastern Silk. However, 21st Century is 1.62 times more volatile than Eastern Silk Industries. It trades about 0.19 of its potential returns per unit of risk. Eastern Silk Industries is currently generating about -0.23 per unit of risk. If you would invest  4,311  in 21st Century Management on October 7, 2024 and sell it today you would earn a total of  4,989  from holding 21st Century Management or generate 115.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.66%
Values	Daily Returns

21st Century Management  vs.  Eastern Silk Industries

21st Century Management

Risk-Adjusted Performance

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Very Weak

Over the last 90 days 21st Century Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, 21st Century is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Eastern Silk Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Silk Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Eastern Silk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with 21st Century and Eastern Silk

The main advantage of trading using opposite 21st Century and Eastern Silk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 21st Century position performs unexpectedly, Eastern Silk 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 Silk will offset losses from the drop in Eastern Silk's long position.

The idea behind 21st Century Management and Eastern Silk Industries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.