Correlation Between Easterly Government and Transport International

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

By analyzing existing cross correlation between Easterly Government Properties and Transport International Holdings, you can compare the effects of market volatilities on Easterly Government and Transport International 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 Easterly Government with a short position of Transport International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Easterly Government and Transport International.

Diversification Opportunities for Easterly Government and Transport International

0.44

Correlation Coefficient

Easterly Government  Transport International

Very weak diversification

The 3 months correlation between Easterly and Transport is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Easterly Government Properties and Transport International Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport International and Easterly Government 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 Easterly Government Properties are associated (or correlated) with Transport International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport International has no effect on the direction of Easterly Government i.e., Easterly Government and Transport International go up and down completely randomly.

Pair Corralation between Easterly Government and Transport International

Assuming the 90 days horizon Easterly Government Properties is expected to under-perform the Transport International. But the stock apears to be less risky and, when comparing its historical volatility, Easterly Government Properties is 3.2 times less risky than Transport International. The stock trades about 0.0 of its potential returns per unit of risk. The Transport International Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Transport International Holdings on October 11, 2024 and sell it today you would earn a total of  65.00  from holding Transport International Holdings or generate 216.67% return on investment over 90 days.

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

Easterly Government Properties  vs.  Transport International Holdin

Easterly Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Easterly Government Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Easterly Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Easterly Government and Transport International

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

The idea behind Easterly Government Properties and Transport International Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.