Correlation Between Eastern and OFX Group

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

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

Diversification Opportunities for Eastern and OFX Group

0.02

Correlation Coefficient

Eastern  OFX Group

Significant diversification

The 3 months correlation between Eastern and OFX is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and OFX Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFX Group 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 OFX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFX Group has no effect on the direction of Eastern i.e., Eastern and OFX Group go up and down completely randomly.

Pair Corralation between Eastern and OFX Group

Considering the 90-day investment horizon Eastern Co is expected to generate 0.28 times more return on investment than OFX Group. However, Eastern Co is 3.58 times less risky than OFX Group. It trades about -0.04 of its potential returns per unit of risk. OFX Group Ltd is currently generating about -0.22 per unit of risk. If you would invest  2,812  in Eastern Co on September 26, 2024 and sell it today you would lose (71.00) from holding Eastern Co or give up 2.52% of portfolio value over 90 days.

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

Eastern Co  vs.  OFX Group Ltd

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 weak performance in the last few months, the Stock's primary 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.

OFX Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OFX Group Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, OFX Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern and OFX Group

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

The idea behind Eastern Co and OFX Group Ltd 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.