Correlation Between Eaco Corp and Trans Lux

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

By analyzing existing cross correlation between Eaco Corp and Trans Lux Cp, you can compare the effects of market volatilities on Eaco Corp and Trans Lux 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 Eaco Corp with a short position of Trans Lux. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaco Corp and Trans Lux.

Diversification Opportunities for Eaco Corp and Trans Lux

-0.42

Correlation Coefficient

Eaco Corp  Trans Lux

Very good diversification

The 3 months correlation between Eaco and Trans is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Eaco Corp and Trans Lux Cp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trans Lux Cp and Eaco Corp 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 Eaco Corp are associated (or correlated) with Trans Lux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trans Lux Cp has no effect on the direction of Eaco Corp i.e., Eaco Corp and Trans Lux go up and down completely randomly.

Pair Corralation between Eaco Corp and Trans Lux

If you would invest  50.00  in Trans Lux Cp on September 2, 2024 and sell it today you would earn a total of  0.00  from holding Trans Lux Cp or generate 0.0% return on investment over 90 days.

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

Eaco Corp  vs.  Trans Lux Cp

Eaco Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaco Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Eaco Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Trans Lux Cp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trans Lux Cp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Trans Lux is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eaco Corp and Trans Lux

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

The idea behind Eaco Corp and Trans Lux Cp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.