Correlation Between Eastern Communications and Gohigh Data

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

By analyzing existing cross correlation between Eastern Communications Co and Gohigh Data Networks, you can compare the effects of market volatilities on Eastern Communications and Gohigh Data 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 Eastern Communications with a short position of Gohigh Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Communications and Gohigh Data.

Diversification Opportunities for Eastern Communications and Gohigh Data

0.68

Correlation Coefficient

Eastern Communications  Gohigh Data

Poor diversification

The 3 months correlation between Eastern and Gohigh is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Communications Co and Gohigh Data Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gohigh Data Networks and Eastern Communications 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 Eastern Communications Co are associated (or correlated) with Gohigh Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gohigh Data Networks has no effect on the direction of Eastern Communications i.e., Eastern Communications and Gohigh Data go up and down completely randomly.

Pair Corralation between Eastern Communications and Gohigh Data

Assuming the 90 days trading horizon Eastern Communications Co is expected to generate 0.65 times more return on investment than Gohigh Data. However, Eastern Communications Co is 1.53 times less risky than Gohigh Data. It trades about 0.03 of its potential returns per unit of risk. Gohigh Data Networks is currently generating about -0.05 per unit of risk. If you would invest  36.00  in Eastern Communications Co on October 9, 2024 and sell it today you would earn a total of  3.00  from holding Eastern Communications Co or generate 8.33% return on investment over 90 days.

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

Eastern Communications Co  vs.  Gohigh Data Networks

Eastern Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Communications Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eastern Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gohigh Data Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gohigh Data Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gohigh Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastern Communications and Gohigh Data

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

The idea behind Eastern Communications Co and Gohigh Data Networks 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.