Correlation Between RB Food and Eastern Commercial

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

By analyzing existing cross correlation between RB Food Supply and Eastern Commercial Leasing, you can compare the effects of market volatilities on RB Food and Eastern Commercial 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 RB Food with a short position of Eastern Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RB Food and Eastern Commercial.

Diversification Opportunities for RB Food and Eastern Commercial

0.48

Correlation Coefficient

RB Food  Eastern Commercial

Very weak diversification

The 3 months correlation between RBF and Eastern is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding RB Food Supply and Eastern Commercial Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Commercial and RB Food 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 RB Food Supply are associated (or correlated) with Eastern Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Commercial has no effect on the direction of RB Food i.e., RB Food and Eastern Commercial go up and down completely randomly.

Pair Corralation between RB Food and Eastern Commercial

Assuming the 90 days trading horizon RB Food Supply is expected to under-perform the Eastern Commercial. But the stock apears to be less risky and, when comparing its historical volatility, RB Food Supply is 1.18 times less risky than Eastern Commercial. The stock trades about -0.17 of its potential returns per unit of risk. The Eastern Commercial Leasing is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  111.00  in Eastern Commercial Leasing on December 1, 2024 and sell it today you would lose (29.00) from holding Eastern Commercial Leasing or give up 26.13% of portfolio value over 90 days.

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

RB Food Supply  vs.  Eastern Commercial Leasing

RB Food Supply

Risk-Adjusted Performance

Very Weak

Over the last 90 days RB Food Supply 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 technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Eastern Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Commercial Leasing 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 essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with RB Food and Eastern Commercial

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

The idea behind RB Food Supply and Eastern Commercial Leasing 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.