Correlation Between Eastern and Federal Home
Can any of the company-specific risk be diversified away by investing in both Eastern and Federal Home 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 Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Federal Home 530, you can compare the effects of market volatilities on Eastern and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Federal Home.
Diversification Opportunities for Eastern and Federal Home
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Eastern and Federal is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Federal Home 530 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home 530 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home 530 has no effect on the direction of Eastern i.e., Eastern and Federal Home go up and down completely randomly.
Pair Corralation between Eastern and Federal Home
Considering the 90-day investment horizon Eastern Co is expected to under-perform the Federal Home. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Co is 7.11 times less risky than Federal Home. The stock trades about -0.18 of its potential returns per unit of risk. The Federal Home 530 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 775.00 in Federal Home 530 on August 29, 2024 and sell it today you would earn a total of 780.00 from holding Federal Home 530 or generate 100.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Eastern Co vs. Federal Home 530
Performance |
| Timeline |
| Eastern |
| Federal Home 530 |
Eastern and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Federal Home
The main advantage of trading using opposite Eastern and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF |
| Federal Home vs. Eastern Co | Federal Home vs. Tower One Wireless | Federal Home vs. Western Asset Investment | Federal Home vs. Comstock Holding Companies |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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