Correlation Between Eastroc Beverage and TCL Corp

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

By analyzing existing cross correlation between Eastroc Beverage Group and TCL Corp, you can compare the effects of market volatilities on Eastroc Beverage and TCL Corp 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 Eastroc Beverage with a short position of TCL Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and TCL Corp.

Diversification Opportunities for Eastroc Beverage and TCL Corp

0.39

Correlation Coefficient

Eastroc Beverage  TCL Corp

Weak diversification

The 3 months correlation between Eastroc and TCL is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and TCL Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCL Corp and Eastroc Beverage 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 Eastroc Beverage Group are associated (or correlated) with TCL Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCL Corp has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and TCL Corp go up and down completely randomly.

Pair Corralation between Eastroc Beverage and TCL Corp

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to generate 1.57 times more return on investment than TCL Corp. However, Eastroc Beverage is 1.57 times more volatile than TCL Corp. It trades about -0.02 of its potential returns per unit of risk. TCL Corp is currently generating about -0.12 per unit of risk. If you would invest  24,390  in Eastroc Beverage Group on December 25, 2024 and sell it today you would lose (1,073) from holding Eastroc Beverage Group or give up 4.4% of portfolio value over 90 days.

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

Eastroc Beverage Group  vs.  TCL Corp

Eastroc Beverage

Risk-Adjusted Performance

Very Weak

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

TCL Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TCL Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Eastroc Beverage and TCL Corp

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

The idea behind Eastroc Beverage Group and TCL Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.