Correlation Between East Coast and Forth Smart

Can any of the company-specific risk be diversified away by investing in both East Coast and Forth Smart 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 Forth Smart 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 Forth Smart Service, you can compare the effects of market volatilities on East Coast and Forth Smart 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 Forth Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Coast and Forth Smart.

Diversification Opportunities for East Coast and Forth Smart

-0.71

Correlation Coefficient

East Coast  Forth Smart

Pay attention - limited upside

The 3 months correlation between East and Forth is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding East Coast Furnitech and Forth Smart Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forth Smart Service 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 Forth Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forth Smart Service has no effect on the direction of East Coast i.e., East Coast and Forth Smart go up and down completely randomly.

Pair Corralation between East Coast and Forth Smart

Assuming the 90 days trading horizon East Coast is expected to generate 7.49 times less return on investment than Forth Smart. In addition to that, East Coast is 1.09 times more volatile than Forth Smart Service. It trades about 0.01 of its total potential returns per unit of risk. Forth Smart Service is currently generating about 0.11 per unit of volatility. If you would invest  650.00  in Forth Smart Service on September 11, 2024 and sell it today you would earn a total of  190.00  from holding Forth Smart Service or generate 29.23% return on investment over 90 days.

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

East Coast Furnitech  vs.  Forth Smart Service

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.

Forth Smart Service

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Forth Smart Service are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Forth Smart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with East Coast and Forth Smart

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

The idea behind East Coast Furnitech and Forth Smart Service 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.