Correlation Between Eastern and New Horizon
Can any of the company-specific risk be diversified away by investing in both Eastern and New Horizon 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 New Horizon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and New Horizon Aircraft, you can compare the effects of market volatilities on Eastern and New Horizon 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 New Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and New Horizon.
Diversification Opportunities for Eastern and New Horizon
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eastern and New is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of Eastern i.e., Eastern and New Horizon go up and down completely randomly.
Pair Corralation between Eastern and New Horizon
Considering the 90-day investment horizon Eastern is expected to generate 14.25 times less return on investment than New Horizon. But when comparing it to its historical volatility, Eastern Co is 6.44 times less risky than New Horizon. It trades about 0.08 of its potential returns per unit of risk. New Horizon Aircraft is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 52.00 in New Horizon Aircraft on September 15, 2024 and sell it today you would earn a total of 20.00 from holding New Horizon Aircraft or generate 38.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. New Horizon Aircraft
Performance |
| Timeline |
| Eastern |
| New Horizon Aircraft |
Eastern and New Horizon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and New Horizon
The main advantage of trading using opposite Eastern and New Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern position performs unexpectedly, New Horizon 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 New Horizon will offset losses from the drop in New Horizon's long position.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF |
| New Horizon vs. Lincoln Electric Holdings | New Horizon vs. Estee Lauder Companies | New Horizon vs. Toro Co | New Horizon vs. Eastern Co |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |