Correlation Between Eastern and AMCON Distributing

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

By analyzing existing cross correlation between Eastern Co and AMCON Distributing, you can compare the effects of market volatilities on Eastern and AMCON Distributing 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 Eastern with a short position of AMCON Distributing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and AMCON Distributing.

Diversification Opportunities for Eastern and AMCON Distributing

0.28

Correlation Coefficient

Eastern  AMCON Distributing

Modest diversification

The 3 months correlation between Eastern and AMCON is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and AMCON Distributing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMCON Distributing and Eastern 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 Eastern Co are associated (or correlated) with AMCON Distributing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMCON Distributing has no effect on the direction of Eastern i.e., Eastern and AMCON Distributing go up and down completely randomly.

Pair Corralation between Eastern and AMCON Distributing

Considering the 90-day investment horizon Eastern Co is expected to under-perform the AMCON Distributing. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Co is 1.87 times less risky than AMCON Distributing. The stock trades about -0.02 of its potential returns per unit of risk. The AMCON Distributing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  13,363  in AMCON Distributing on November 28, 2024 and sell it today you would earn a total of  348.00  from holding AMCON Distributing or generate 2.6% return on investment over 90 days.

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

Eastern Co  vs.  AMCON Distributing

Eastern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Eastern is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

AMCON Distributing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AMCON Distributing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, AMCON Distributing may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Eastern and AMCON Distributing

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

The idea behind Eastern Co and AMCON Distributing 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.