Correlation Between Eastwood Bio and Covalon Technologies

Can any of the company-specific risk be diversified away by investing in both Eastwood Bio and Covalon Technologies 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 Eastwood Bio and Covalon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastwood Bio Medical Canada and Covalon Technologies, you can compare the effects of market volatilities on Eastwood Bio and Covalon Technologies 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 Eastwood Bio with a short position of Covalon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastwood Bio and Covalon Technologies.

Diversification Opportunities for Eastwood Bio and Covalon Technologies

0.39

Correlation Coefficient

Eastwood Bio  Covalon Technologies

Weak diversification

The 3 months correlation between Eastwood and Covalon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eastwood Bio Medical Canada and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and Eastwood Bio 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 Eastwood Bio Medical Canada are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of Eastwood Bio i.e., Eastwood Bio and Covalon Technologies go up and down completely randomly.

Pair Corralation between Eastwood Bio and Covalon Technologies

Assuming the 90 days horizon Eastwood Bio Medical Canada is expected to under-perform the Covalon Technologies. In addition to that, Eastwood Bio is 2.68 times more volatile than Covalon Technologies. It trades about -0.06 of its total potential returns per unit of risk. Covalon Technologies is currently generating about -0.13 per unit of volatility. If you would invest  325.00  in Covalon Technologies on December 30, 2024 and sell it today you would lose (98.00) from holding Covalon Technologies or give up 30.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Eastwood Bio Medical Canada  vs.  Covalon Technologies

Eastwood Bio Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastwood Bio Medical Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Covalon Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Covalon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Eastwood Bio and Covalon Technologies

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

The idea behind Eastwood Bio Medical Canada and Covalon Technologies 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.