Correlation Between Industrial and Eastroc Beverage

Can any of the company-specific risk be diversified away by investing in both Industrial and Eastroc Beverage 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 Eastroc Beverage 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 Eastroc Beverage Group, you can compare the effects of market volatilities on Industrial and Eastroc Beverage 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 Eastroc Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Eastroc Beverage.

Diversification Opportunities for Industrial and Eastroc Beverage

0.85

Correlation Coefficient

Industrial  Eastroc Beverage

Very poor diversification

The 3 months correlation between Industrial and Eastroc is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage 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 Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of Industrial i.e., Industrial and Eastroc Beverage go up and down completely randomly.

Pair Corralation between Industrial and Eastroc Beverage

Assuming the 90 days trading horizon Industrial is expected to generate 2.92 times less return on investment than Eastroc Beverage. But when comparing it to its historical volatility, Industrial and Commercial is 1.63 times less risky than Eastroc Beverage. It trades about 0.15 of its potential returns per unit of risk. Eastroc Beverage Group is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  17,211  in Eastroc Beverage Group on September 14, 2024 and sell it today you would earn a total of  7,426  from holding Eastroc Beverage Group or generate 43.15% return on investment over 90 days.

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

Industrial and Commercial  vs.  Eastroc Beverage Group

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastroc Beverage

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Eastroc Beverage

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

The idea behind Industrial and Commercial and Eastroc Beverage Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.