Correlation Between East Money and Postal Savings

Can any of the company-specific risk be diversified away by investing in both East Money and Postal Savings 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 East Money and Postal Savings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between East Money Information and Postal Savings Bank, you can compare the effects of market volatilities on East Money and Postal Savings 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 East Money with a short position of Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Money and Postal Savings.

Diversification Opportunities for East Money and Postal Savings

0.27

Correlation Coefficient

East Money  Postal Savings

Modest diversification

The 3 months correlation between East and Postal is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding East Money Information and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank and East Money 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 East Money Information are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of East Money i.e., East Money and Postal Savings go up and down completely randomly.

Pair Corralation between East Money and Postal Savings

Assuming the 90 days trading horizon East Money Information is expected to generate 2.0 times more return on investment than Postal Savings. However, East Money is 2.0 times more volatile than Postal Savings Bank. It trades about 0.04 of its potential returns per unit of risk. Postal Savings Bank is currently generating about 0.04 per unit of risk. If you would invest  1,800  in East Money Information on October 4, 2024 and sell it today you would earn a total of  782.00  from holding East Money Information or generate 43.44% return on investment over 90 days.

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

East Money Information  vs.  Postal Savings Bank

East Money Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East Money Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East Money sustained solid returns over the last few months and may actually be approaching a breakup point.

Postal Savings Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Postal Savings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with East Money and Postal Savings

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

The idea behind East Money Information and Postal Savings Bank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.