Correlation Between East Coast and Qualitech Public

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

Diversification Opportunities for East Coast and Qualitech Public

0.9

Correlation Coefficient

East Coast  Qualitech Public

Almost no diversification

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

Pair Corralation between East Coast and Qualitech Public

Assuming the 90 days trading horizon East Coast is expected to generate 7.52 times less return on investment than Qualitech Public. In addition to that, East Coast is 1.76 times more volatile than Qualitech Public. It trades about 0.02 of its total potential returns per unit of risk. Qualitech Public is currently generating about 0.23 per unit of volatility. If you would invest  210.00  in Qualitech Public on September 24, 2024 and sell it today you would earn a total of  20.00  from holding Qualitech Public or generate 9.52% return on investment over 90 days.

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

East Coast Furnitech  vs.  Qualitech Public

East Coast Furnitech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Coast Furnitech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Qualitech Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qualitech Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with East Coast and Qualitech Public

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

The idea behind East Coast Furnitech and Qualitech 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.