Correlation Between Eastroc Beverage and Namchow Food

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

Diversification Opportunities for Eastroc Beverage and Namchow Food

0.94

Correlation Coefficient

Eastroc Beverage  Namchow Food

Almost no diversification

The 3 months correlation between Eastroc and Namchow is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Namchow Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namchow Food Group 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 Namchow Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namchow Food Group has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Namchow Food go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Namchow Food

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to generate 1.04 times more return on investment than Namchow Food. However, Eastroc Beverage is 1.04 times more volatile than Namchow Food Group. It trades about 0.07 of its potential returns per unit of risk. Namchow Food Group is currently generating about -0.01 per unit of risk. If you would invest  13,212  in Eastroc Beverage Group on September 20, 2024 and sell it today you would earn a total of  10,788  from holding Eastroc Beverage Group or generate 81.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

Eastroc Beverage Group  vs.  Namchow Food Group

Eastroc Beverage

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 20 (%) 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.

Namchow Food Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Namchow Food Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namchow Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastroc Beverage and Namchow Food

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

The idea behind Eastroc Beverage Group and Namchow Food 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.