Correlation Between Eastside Distilling and Healthy Choice

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

By analyzing existing cross correlation between Eastside Distilling and Healthy Choice Wellness, you can compare the effects of market volatilities on Eastside Distilling and Healthy Choice 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 Eastside Distilling with a short position of Healthy Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastside Distilling and Healthy Choice.

Diversification Opportunities for Eastside Distilling and Healthy Choice

-0.62

Correlation Coefficient

Eastside Distilling  Healthy Choice

Excellent diversification

The 3 months correlation between Eastside and Healthy is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Eastside Distilling and Healthy Choice Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthy Choice Wellness and Eastside Distilling 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 Eastside Distilling are associated (or correlated) with Healthy Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthy Choice Wellness has no effect on the direction of Eastside Distilling i.e., Eastside Distilling and Healthy Choice go up and down completely randomly.

Pair Corralation between Eastside Distilling and Healthy Choice

Given the investment horizon of 90 days Eastside Distilling is expected to generate 7.54 times less return on investment than Healthy Choice. But when comparing it to its historical volatility, Eastside Distilling is 2.79 times less risky than Healthy Choice. It trades about 0.06 of its potential returns per unit of risk. Healthy Choice Wellness is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  87.00  in Healthy Choice Wellness on October 23, 2024 and sell it today you would earn a total of  36.00  from holding Healthy Choice Wellness or generate 41.38% return on investment over 90 days.

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

Eastside Distilling  vs.  Healthy Choice Wellness

Eastside Distilling

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eastside Distilling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Eastside Distilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Healthy Choice Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthy Choice Wellness has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Healthy Choice is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eastside Distilling and Healthy Choice

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

The idea behind Eastside Distilling and Healthy Choice Wellness 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.