Correlation Between Western Superconducting and Eastroc Beverage

Can any of the company-specific risk be diversified away by investing in both Western Superconducting and Eastroc Beverage 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 Western Superconducting and Eastroc Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Superconducting Tech and Eastroc Beverage Group, you can compare the effects of market volatilities on Western Superconducting and Eastroc Beverage 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 Western Superconducting with a short position of Eastroc Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Superconducting and Eastroc Beverage.

Diversification Opportunities for Western Superconducting and Eastroc Beverage

0.54

Correlation Coefficient

Western Superconducting  Eastroc Beverage

Very weak diversification

The 3 months correlation between Western and Eastroc is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Western Superconducting Tech and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage and Western Superconducting 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 Western Superconducting Tech are associated (or correlated) with Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of Western Superconducting i.e., Western Superconducting and Eastroc Beverage go up and down completely randomly.

Pair Corralation between Western Superconducting and Eastroc Beverage

Assuming the 90 days trading horizon Western Superconducting Tech is expected to under-perform the Eastroc Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Western Superconducting Tech is 1.48 times less risky than Eastroc Beverage. The stock trades about -0.07 of its potential returns per unit of risk. The Eastroc Beverage Group is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  21,150  in Eastroc Beverage Group on September 27, 2024 and sell it today you would earn a total of  3,240  from holding Eastroc Beverage Group or generate 15.32% return on investment over 90 days.

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

Western Superconducting Tech  vs.  Eastroc Beverage Group

Western Superconducting

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Superconducting Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Superconducting sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastroc Beverage

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 15 (%) 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.

Pair Trading with Western Superconducting and Eastroc Beverage

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

The idea behind Western Superconducting Tech and Eastroc Beverage 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.