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 Yitai, 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

-0.77

Correlation Coefficient

Eastroc Beverage  Inner Mongolia

Pay attention - limited upside

The 3 months correlation between Eastroc and Inner is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Inner Mongolia Yitai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia Yitai 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 Yitai 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 generate 1.26 times more return on investment than Inner Mongolia. However, Eastroc Beverage is 1.26 times more volatile than Inner Mongolia Yitai. It trades about 0.18 of its potential returns per unit of risk. Inner Mongolia Yitai is currently generating about 0.0 per unit of risk. If you would invest  14,513  in Eastroc Beverage Group on October 12, 2024 and sell it today you would earn a total of  12,627  from holding Eastroc Beverage Group or generate 87.0% 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.  Inner Mongolia Yitai

Eastroc Beverage

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 12 (%) 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.

Inner Mongolia Yitai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inner Mongolia Yitai 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 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 Yitai 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.