Correlation Between Eastern and Logan Ridge

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

By analyzing existing cross correlation between Eastern Co and Logan Ridge Finance, you can compare the effects of market volatilities on Eastern and Logan Ridge 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 Logan Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Logan Ridge.

Diversification Opportunities for Eastern and Logan Ridge

-0.75

Correlation Coefficient

Eastern  Logan Ridge

Pay attention - limited upside

The 3 months correlation between Eastern and Logan is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Logan Ridge Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logan Ridge Finance 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 Logan Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logan Ridge Finance has no effect on the direction of Eastern i.e., Eastern and Logan Ridge go up and down completely randomly.

Pair Corralation between Eastern and Logan Ridge

Considering the 90-day investment horizon Eastern Co is expected to generate 2.62 times more return on investment than Logan Ridge. However, Eastern is 2.62 times more volatile than Logan Ridge Finance. It trades about 0.05 of its potential returns per unit of risk. Logan Ridge Finance is currently generating about 0.04 per unit of risk. If you would invest  1,853  in Eastern Co on September 20, 2024 and sell it today you would earn a total of  1,061  from holding Eastern Co or generate 57.26% return on investment over 90 days.

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

Eastern Co  vs.  Logan Ridge Finance

Eastern

Risk-Adjusted Performance

0 of 100

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.

Logan Ridge Finance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Logan Ridge Finance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Logan Ridge is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eastern and Logan Ridge

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

The idea behind Eastern Co and Logan Ridge Finance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.