Correlation Between Eastern and Metalink
Can any of the company-specific risk be diversified away by investing in both Eastern and Metalink 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 Metalink into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Metalink, you can compare the effects of market volatilities on Eastern and Metalink 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 Metalink. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Metalink.
Diversification Opportunities for Eastern and Metalink
Good diversification
The 3 months correlation between Eastern and Metalink is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Metalink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalink 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 Metalink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalink has no effect on the direction of Eastern i.e., Eastern and Metalink go up and down completely randomly.
Pair Corralation between Eastern and Metalink
Considering the 90-day investment horizon Eastern is expected to generate 15.38 times less return on investment than Metalink. But when comparing it to its historical volatility, Eastern Co is 18.93 times less risky than Metalink. It trades about 0.07 of its potential returns per unit of risk. Metalink is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 59.00 in Metalink on September 2, 2024 and sell it today you would lose (16.00) from holding Metalink or give up 27.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. Metalink
Performance |
| Timeline |
| Eastern |
| Metalink |
Eastern and Metalink Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Metalink
The main advantage of trading using opposite Eastern and Metalink positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern position performs unexpectedly, Metalink 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 Metalink will offset losses from the drop in Metalink's long position.The idea behind Eastern Co and Metalink 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.| Metalink vs. Eastern Co | Metalink vs. Commonwealth Bank of | Metalink vs. Merit Medical Systems | Metalink vs. Encore Capital Group |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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