Correlation Between Eastern Star and Diamond Building

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Can any of the company-specific risk be diversified away by investing in both Eastern Star and Diamond Building 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 Star and Diamond Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Star Real and Diamond Building Products, you can compare the effects of market volatilities on Eastern Star and Diamond Building 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 Star with a short position of Diamond Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Star and Diamond Building.

Diversification Opportunities for Eastern Star and Diamond Building

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Eastern and Diamond is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Star Real and Diamond Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Building Products and Eastern Star 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 Star Real are associated (or correlated) with Diamond Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Building Products has no effect on the direction of Eastern Star i.e., Eastern Star and Diamond Building go up and down completely randomly.

Pair Corralation between Eastern Star and Diamond Building

Assuming the 90 days trading horizon Eastern Star Real is expected to under-perform the Diamond Building. In addition to that, Eastern Star is 3.13 times more volatile than Diamond Building Products. It trades about -0.12 of its total potential returns per unit of risk. Diamond Building Products is currently generating about -0.29 per unit of volatility. If you would invest  775.00  in Diamond Building Products on September 23, 2024 and sell it today you would lose (25.00) from holding Diamond Building Products or give up 3.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Eastern Star Real  vs.  Diamond Building Products

 Performance 
       Timeline  
Eastern Star Real 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Eastern Star Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Diamond Building Products 

Risk-Adjusted Performance

0 of 100

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

Eastern Star and Diamond Building Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eastern Star and Diamond Building

The main advantage of trading using opposite Eastern Star and Diamond Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Star position performs unexpectedly, Diamond Building 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 Diamond Building will offset losses from the drop in Diamond Building's long position.
The idea behind Eastern Star Real and Diamond Building 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.
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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