Correlation Between Gem Year and Eastern Communications

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

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

Diversification Opportunities for Gem Year and Eastern Communications

0.59

Correlation Coefficient

Gem Year  Eastern Communications

Very weak diversification

The 3 months correlation between Gem and Eastern is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gem Year Industrial Co and Eastern Communications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Communications and Gem Year 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 Gem Year Industrial Co are associated (or correlated) with Eastern Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Communications has no effect on the direction of Gem Year i.e., Gem Year and Eastern Communications go up and down completely randomly.

Pair Corralation between Gem Year and Eastern Communications

Assuming the 90 days trading horizon Gem Year is expected to generate 4.21 times less return on investment than Eastern Communications. In addition to that, Gem Year is 1.01 times more volatile than Eastern Communications Co. It trades about 0.0 of its total potential returns per unit of risk. Eastern Communications Co is currently generating about 0.0 per unit of volatility. If you would invest  41.00  in Eastern Communications Co on October 15, 2024 and sell it today you would lose (3.00) from holding Eastern Communications Co or give up 7.32% of portfolio value over 90 days.

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

Gem Year Industrial Co  vs.  Eastern Communications Co

Gem Year Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gem Year Industrial Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gem Year sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastern Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gem Year and Eastern Communications

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

The idea behind Gem Year Industrial Co and Eastern Communications 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..