Correlation Between State Grid and Eastern Air

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

By analyzing existing cross correlation between State Grid InformationCommunication and Eastern Air Logistics, you can compare the effects of market volatilities on State Grid and Eastern Air 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 State Grid with a short position of Eastern Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Eastern Air.

Diversification Opportunities for State Grid and Eastern Air

0.2

Correlation Coefficient

State Grid  Eastern Air

Modest diversification

The 3 months correlation between State and Eastern is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Eastern Air Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Air Logistics and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Eastern Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Air Logistics has no effect on the direction of State Grid i.e., State Grid and Eastern Air go up and down completely randomly.

Pair Corralation between State Grid and Eastern Air

Assuming the 90 days trading horizon State Grid is expected to generate 1.19 times less return on investment than Eastern Air. In addition to that, State Grid is 1.15 times more volatile than Eastern Air Logistics. It trades about 0.02 of its total potential returns per unit of risk. Eastern Air Logistics is currently generating about 0.03 per unit of volatility. If you would invest  1,488  in Eastern Air Logistics on October 22, 2024 and sell it today you would earn a total of  276.00  from holding Eastern Air Logistics or generate 18.55% return on investment over 90 days.

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

State Grid InformationCommunic  vs.  Eastern Air Logistics

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

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

Eastern Air Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with State Grid and Eastern Air

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

The idea behind State Grid InformationCommunication and Eastern Air Logistics 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.