Correlation Between Eastern Star and TPI Polene

Can any of the company-specific risk be diversified away by investing in both Eastern Star and TPI Polene 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 TPI Polene 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 TPI Polene Public, you can compare the effects of market volatilities on Eastern Star and TPI Polene 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 TPI Polene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Star and TPI Polene.

Diversification Opportunities for Eastern Star and TPI Polene

0.59

Correlation Coefficient

Eastern Star  TPI Polene

Very weak diversification

The 3 months correlation between Eastern and TPI is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Star Real and TPI Polene Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPI Polene Public 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 TPI Polene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPI Polene Public has no effect on the direction of Eastern Star i.e., Eastern Star and TPI Polene go up and down completely randomly.

Pair Corralation between Eastern Star and TPI Polene

Assuming the 90 days trading horizon Eastern Star Real is expected to generate 46.97 times more return on investment than TPI Polene. However, Eastern Star is 46.97 times more volatile than TPI Polene Public. It trades about 0.05 of its potential returns per unit of risk. TPI Polene Public is currently generating about -0.04 per unit of risk. If you would invest  24.00  in Eastern Star Real on September 24, 2024 and sell it today you would lose (2.00) from holding Eastern Star Real or give up 8.33% of portfolio value over 90 days.

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

Eastern Star Real  vs.  TPI Polene Public

Eastern Star Real

Risk-Adjusted Performance

0 of 100

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.

TPI Polene Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPI Polene Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eastern Star and TPI Polene

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

The idea behind Eastern Star Real and TPI Polene Public 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..