Correlation Between CP ALL and Eastern Technical

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

By analyzing existing cross correlation between CP ALL Public and Eastern Technical Engineering, you can compare the effects of market volatilities on CP ALL and Eastern Technical 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 CP ALL with a short position of Eastern Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CP ALL and Eastern Technical.

Diversification Opportunities for CP ALL and Eastern Technical

0.53

Correlation Coefficient

CP ALL  Eastern Technical

Very weak diversification

The 3 months correlation between CPALL-R and Eastern is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and Eastern Technical Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Technical and CP ALL 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 CP ALL Public are associated (or correlated) with Eastern Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Technical has no effect on the direction of CP ALL i.e., CP ALL and Eastern Technical go up and down completely randomly.

Pair Corralation between CP ALL and Eastern Technical

Assuming the 90 days trading horizon CP ALL is expected to generate 83.09 times less return on investment than Eastern Technical. But when comparing it to its historical volatility, CP ALL Public is 68.56 times less risky than Eastern Technical. It trades about 0.06 of its potential returns per unit of risk. Eastern Technical Engineering is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Eastern Technical Engineering on September 5, 2024 and sell it today you would lose (28.00) from holding Eastern Technical Engineering or give up 23.93% of portfolio value over 90 days.

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

CP ALL Public  vs.  Eastern Technical Engineering

CP ALL Public

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, CP ALL is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Eastern Technical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Technical Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with CP ALL and Eastern Technical

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

The idea behind CP ALL Public and Eastern Technical Engineering 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.