Correlation Between Eagle Cold and Wonderful

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

By analyzing existing cross correlation between Eagle Cold Storage and Wonderful Hi Tech Co, you can compare the effects of market volatilities on Eagle Cold and Wonderful 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 Eagle Cold with a short position of Wonderful. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Cold and Wonderful.

Diversification Opportunities for Eagle Cold and Wonderful

0.35

Correlation Coefficient

Eagle Cold  Wonderful

Weak diversification

The 3 months correlation between Eagle and Wonderful is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Cold Storage and Wonderful Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonderful Hi Tech and Eagle Cold 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 Eagle Cold Storage are associated (or correlated) with Wonderful. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonderful Hi Tech has no effect on the direction of Eagle Cold i.e., Eagle Cold and Wonderful go up and down completely randomly.

Pair Corralation between Eagle Cold and Wonderful

Assuming the 90 days trading horizon Eagle Cold is expected to generate 3.69 times less return on investment than Wonderful. But when comparing it to its historical volatility, Eagle Cold Storage is 1.93 times less risky than Wonderful. It trades about 0.01 of its potential returns per unit of risk. Wonderful Hi Tech Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,530  in Wonderful Hi Tech Co on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Wonderful Hi Tech Co or generate 0.0% return on investment over 90 days.

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

Eagle Cold Storage  vs.  Wonderful Hi Tech Co

Eagle Cold Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Cold Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eagle Cold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wonderful Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wonderful Hi Tech Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wonderful is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Eagle Cold and Wonderful

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

The idea behind Eagle Cold Storage and Wonderful Hi Tech Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.