Correlation Between East Coast and Home Pottery
Can any of the company-specific risk be diversified away by investing in both East Coast and Home Pottery 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 East Coast and Home Pottery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Coast Furnitech and Home Pottery Public, you can compare the effects of market volatilities on East Coast and Home Pottery 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 East Coast with a short position of Home Pottery. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Coast and Home Pottery.
Diversification Opportunities for East Coast and Home Pottery
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between East and Home is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding East Coast Furnitech and Home Pottery Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Pottery Public and East Coast 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 East Coast Furnitech are associated (or correlated) with Home Pottery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Pottery Public has no effect on the direction of East Coast i.e., East Coast and Home Pottery go up and down completely randomly.
Pair Corralation between East Coast and Home Pottery
Assuming the 90 days trading horizon East Coast Furnitech is expected to generate 16.63 times more return on investment than Home Pottery. However, East Coast is 16.63 times more volatile than Home Pottery Public. It trades about 0.03 of its potential returns per unit of risk. Home Pottery Public is currently generating about -0.03 per unit of risk. If you would invest 156.00 in East Coast Furnitech on November 27, 2024 and sell it today you would lose (135.00) from holding East Coast Furnitech or give up 86.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Coast Furnitech vs. Home Pottery Public
Performance |
| Timeline |
| East Coast Furnitech |
| Home Pottery Public |
East Coast and Home Pottery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Coast and Home Pottery
The main advantage of trading using opposite East Coast and Home Pottery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Coast position performs unexpectedly, Home Pottery 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 Home Pottery will offset losses from the drop in Home Pottery's long position.| East Coast vs. G Capital Public | East Coast vs. E for L | East Coast vs. Filter Vision Public | East Coast vs. Chewathai Public |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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