Correlation Between East Coast and ARIP Public

Can any of the company-specific risk be diversified away by investing in both East Coast and ARIP Public 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 East Coast and ARIP Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between East Coast Furnitech and ARIP Public, you can compare the effects of market volatilities on East Coast and ARIP Public 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 East Coast with a short position of ARIP Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Coast and ARIP Public.

Diversification Opportunities for East Coast and ARIP Public

0.9

Correlation Coefficient

East Coast  ARIP Public

Almost no diversification

The 3 months correlation between East and ARIP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding East Coast Furnitech and ARIP Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARIP Public and East Coast 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 East Coast Furnitech are associated (or correlated) with ARIP Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARIP Public has no effect on the direction of East Coast i.e., East Coast and ARIP Public go up and down completely randomly.

Pair Corralation between East Coast and ARIP Public

Assuming the 90 days trading horizon East Coast Furnitech is expected to generate 1.45 times more return on investment than ARIP Public. However, East Coast is 1.45 times more volatile than ARIP Public. It trades about 0.01 of its potential returns per unit of risk. ARIP Public is currently generating about 0.0 per unit of risk. If you would invest  48.00  in East Coast Furnitech on September 11, 2024 and sell it today you would lose (1.00) from holding East Coast Furnitech or give up 2.08% of portfolio value over 90 days.

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

East Coast Furnitech  vs.  ARIP Public

East Coast Furnitech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in East Coast Furnitech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, East Coast is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ARIP Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARIP Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, ARIP Public is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with East Coast and ARIP Public

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

The idea behind East Coast Furnitech and ARIP Public 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.