Correlation Between Eastern and Arq
Can any of the company-specific risk be diversified away by investing in both Eastern and Arq 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 and Arq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Arq Inc, you can compare the effects of market volatilities on Eastern and Arq 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 with a short position of Arq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Arq.
Diversification Opportunities for Eastern and Arq
Pay attention - limited upside
The 3 months correlation between Eastern and Arq is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Arq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arq Inc and Eastern 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 Co are associated (or correlated) with Arq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arq Inc has no effect on the direction of Eastern i.e., Eastern and Arq go up and down completely randomly.
Pair Corralation between Eastern and Arq
Considering the 90-day investment horizon Eastern Co is expected to under-perform the Arq. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Co is 1.52 times less risky than Arq. The stock trades about -0.11 of its potential returns per unit of risk. The Arq Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 587.00 in Arq Inc on August 31, 2024 and sell it today you would earn a total of 174.00 from holding Arq Inc or generate 29.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. Arq Inc
Performance |
| Timeline |
| Eastern |
| Arq Inc |
Eastern and Arq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Arq
The main advantage of trading using opposite Eastern and Arq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern position performs unexpectedly, Arq 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 Arq will offset losses from the drop in Arq's long position.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. Kennametal |
| Arq vs. China Tontine Wines | Arq vs. Doubledown Interactive Co | Arq vs. Afya | Arq vs. Proficient Auto Logistics, |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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