Correlation Between Industrial and Eastern Air

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

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

Diversification Opportunities for Industrial and Eastern Air

0.11

Correlation Coefficient

Industrial  Eastern Air

Average diversification

The 3 months correlation between Industrial and Eastern is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial 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 Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and Eastern Air go up and down completely randomly.

Pair Corralation between Industrial and Eastern Air

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.53 times more return on investment than Eastern Air. However, Industrial and Commercial is 1.89 times less risky than Eastern Air. It trades about 0.1 of its potential returns per unit of risk. Eastern Air Logistics is currently generating about 0.02 per unit of risk. If you would invest  407.00  in Industrial and Commercial on October 4, 2024 and sell it today you would earn a total of  273.00  from holding Industrial and Commercial or generate 67.08% return on investment over 90 days.

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

Industrial and Commercial  vs.  Eastern Air Logistics

Industrial and Commercial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Industrial and Eastern Air

The main advantage of trading using opposite Industrial and Eastern Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.