Correlation Between Eastroc Beverage and Inner Mongolia

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

Diversification Opportunities for Eastroc Beverage and Inner Mongolia

0.14

Correlation Coefficient

Eastroc Beverage  Inner Mongolia

Average diversification

The 3 months correlation between Eastroc and Inner is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Inner Mongolia ERDOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia ERDOS 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 Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia ERDOS has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Inner Mongolia go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Inner Mongolia

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to under-perform the Inner Mongolia. In addition to that, Eastroc Beverage is 1.69 times more volatile than Inner Mongolia ERDOS. It trades about -0.02 of its total potential returns per unit of risk. Inner Mongolia ERDOS is currently generating about -0.01 per unit of volatility. If you would invest  952.00  in Inner Mongolia ERDOS on December 25, 2024 and sell it today you would lose (16.00) from holding Inner Mongolia ERDOS or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Eastroc Beverage Group  vs.  Inner Mongolia ERDOS

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.

Inner Mongolia ERDOS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inner Mongolia ERDOS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Inner Mongolia 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 Inner Mongolia

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

The idea behind Eastroc Beverage Group and Inner Mongolia ERDOS 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.