Correlation Between Eastern and Reynolds Consumer

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

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

Diversification Opportunities for Eastern and Reynolds Consumer

0.81

Correlation Coefficient

Eastern  Reynolds Consumer

Very poor diversification

The 3 months correlation between Eastern and Reynolds is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Reynolds Consumer Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reynolds Consumer 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 Reynolds Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reynolds Consumer has no effect on the direction of Eastern i.e., Eastern and Reynolds Consumer go up and down completely randomly.

Pair Corralation between Eastern and Reynolds Consumer

Considering the 90-day investment horizon Eastern Co is expected to generate 1.68 times more return on investment than Reynolds Consumer. However, Eastern is 1.68 times more volatile than Reynolds Consumer Products. It trades about 0.02 of its potential returns per unit of risk. Reynolds Consumer Products is currently generating about -0.08 per unit of risk. If you would invest  2,759  in Eastern Co on October 21, 2024 and sell it today you would earn a total of  11.00  from holding Eastern Co or generate 0.4% return on investment over 90 days.

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

Eastern Co  vs.  Reynolds Consumer Products

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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Reynolds Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reynolds Consumer Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Eastern and Reynolds Consumer

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

The idea behind Eastern Co and Reynolds Consumer Products 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.