Correlation Between Eastern Technical and Major Cineplex

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

Diversification Opportunities for Eastern Technical and Major Cineplex

0.62

Correlation Coefficient

Eastern Technical  Major Cineplex

Poor diversification

The 3 months correlation between Eastern and Major is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Technical Engineering and Major Cineplex Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Cineplex Group 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 Major Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Cineplex Group has no effect on the direction of Eastern Technical i.e., Eastern Technical and Major Cineplex go up and down completely randomly.

Pair Corralation between Eastern Technical and Major Cineplex

Assuming the 90 days trading horizon Eastern Technical is expected to generate 2.02 times less return on investment than Major Cineplex. But when comparing it to its historical volatility, Eastern Technical Engineering is 1.4 times less risky than Major Cineplex. It trades about 0.11 of its potential returns per unit of risk. Major Cineplex Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Major Cineplex Group on September 2, 2024 and sell it today you would earn a total of  0.00  from holding Major Cineplex Group or generate 0.0% 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.  Major Cineplex Group

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.

Major Cineplex Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Major Cineplex Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Major Cineplex reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern Technical and Major Cineplex

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

The idea behind Eastern Technical Engineering and Major Cineplex Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.