Correlation Between Eastern Air and APT Medical

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

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

Diversification Opportunities for Eastern Air and APT Medical

0.04

Correlation Coefficient

Eastern Air  APT Medical

Significant diversification

The 3 months correlation between Eastern and APT is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Air Logistics and APT Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APT Medical and Eastern Air 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 Eastern Air Logistics are associated (or correlated) with APT Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APT Medical has no effect on the direction of Eastern Air i.e., Eastern Air and APT Medical go up and down completely randomly.

Pair Corralation between Eastern Air and APT Medical

Assuming the 90 days trading horizon Eastern Air is expected to generate 1.66 times less return on investment than APT Medical. In addition to that, Eastern Air is 1.04 times more volatile than APT Medical. It trades about 0.04 of its total potential returns per unit of risk. APT Medical is currently generating about 0.07 per unit of volatility. If you would invest  25,601  in APT Medical on October 6, 2024 and sell it today you would earn a total of  10,691  from holding APT Medical or generate 41.76% return on investment over 90 days.

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

Eastern Air Logistics  vs.  APT Medical

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.

APT Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APT Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eastern Air and APT Medical

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

The idea behind Eastern Air Logistics and APT Medical 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.