Correlation Between Eastroc Beverage and Kidswant Children

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

Diversification Opportunities for Eastroc Beverage and Kidswant Children

-0.67

Correlation Coefficient

Eastroc Beverage  Kidswant Children

Excellent diversification

The 3 months correlation between Eastroc and Kidswant is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Kidswant Children Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kidswant Children 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 Kidswant Children. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kidswant Children has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Kidswant Children go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Kidswant Children

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to under-perform the Kidswant Children. But the stock apears to be less risky and, when comparing its historical volatility, Eastroc Beverage Group is 1.78 times less risky than Kidswant Children. The stock trades about -0.03 of its potential returns per unit of risk. The Kidswant Children Products is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,127  in Kidswant Children Products on December 26, 2024 and sell it today you would earn a total of  319.00  from holding Kidswant Children Products or generate 28.31% return on investment over 90 days.

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

Eastroc Beverage Group  vs.  Kidswant Children Products

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.

Kidswant Children

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kidswant Children Products are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kidswant Children sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastroc Beverage and Kidswant Children

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

The idea behind Eastroc Beverage Group and Kidswant Children Products 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.