Correlation Between Eastern Technical and Autocorp Holding

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

By analyzing existing cross correlation between Eastern Technical Engineering and Autocorp Holding Public, you can compare the effects of market volatilities on Eastern Technical and Autocorp Holding 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 Technical with a short position of Autocorp Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Technical and Autocorp Holding.

Diversification Opportunities for Eastern Technical and Autocorp Holding

0.79

Correlation Coefficient

Eastern Technical  Autocorp Holding

Poor diversification

The 3 months correlation between Eastern and Autocorp is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Technical Engineering and Autocorp Holding Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autocorp Holding Public and Eastern Technical 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 Technical Engineering are associated (or correlated) with Autocorp Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autocorp Holding Public has no effect on the direction of Eastern Technical i.e., Eastern Technical and Autocorp Holding go up and down completely randomly.

Pair Corralation between Eastern Technical and Autocorp Holding

Assuming the 90 days trading horizon Eastern Technical is expected to generate 1.04 times less return on investment than Autocorp Holding. But when comparing it to its historical volatility, Eastern Technical Engineering is 1.0 times less risky than Autocorp Holding. It trades about 0.11 of its potential returns per unit of risk. Autocorp Holding Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Autocorp Holding Public on September 2, 2024 and sell it today you would earn a total of  11.00  from holding Autocorp Holding Public or generate 14.1% return on investment over 90 days.

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

Eastern Technical Engineering  vs.  Autocorp Holding Public

Eastern Technical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Technical Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Eastern Technical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Autocorp Holding Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Autocorp Holding Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Autocorp Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern Technical and Autocorp Holding

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

The idea behind Eastern Technical Engineering and Autocorp Holding 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.