Correlation Between Eastroc Beverage and City Development

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

Diversification Opportunities for Eastroc Beverage and City Development

-0.06

Correlation Coefficient

Eastroc Beverage  City Development

Good diversification

The 3 months correlation between Eastroc and City is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and City Development Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Development Env 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 City Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Development Env has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and City Development go up and down completely randomly.

Pair Corralation between Eastroc Beverage and City Development

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to generate 0.85 times more return on investment than City Development. However, Eastroc Beverage Group is 1.17 times less risky than City Development. It trades about 0.18 of its potential returns per unit of risk. City Development Environment is currently generating about 0.02 per unit of risk. If you would invest  22,062  in Eastroc Beverage Group on October 11, 2024 and sell it today you would earn a total of  5,078  from holding Eastroc Beverage Group or generate 23.02% return on investment over 90 days.

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

Eastroc Beverage Group  vs.  City Development Environment

Eastroc Beverage

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 14 (%) 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.

City Development Env

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in City Development Environment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, City Development is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastroc Beverage and City Development

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

The idea behind Eastroc Beverage Group and City Development Environment 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.