Correlation Between Eastern and Stanley Black
Can any of the company-specific risk be diversified away by investing in both Eastern and Stanley Black 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 Stanley Black into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Stanley Black Decker, you can compare the effects of market volatilities on Eastern and Stanley Black 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 Stanley Black. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Stanley Black.
Diversification Opportunities for Eastern and Stanley Black
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastern and Stanley is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Stanley Black Decker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Black Decker 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 Stanley Black. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Black Decker has no effect on the direction of Eastern i.e., Eastern and Stanley Black go up and down completely randomly.
Pair Corralation between Eastern and Stanley Black
Considering the 90-day investment horizon Eastern is expected to generate 1.51 times less return on investment than Stanley Black. In addition to that, Eastern is 1.49 times more volatile than Stanley Black Decker. It trades about 0.16 of its total potential returns per unit of risk. Stanley Black Decker is currently generating about 0.36 per unit of volatility. If you would invest 8,029 in Stanley Black Decker on November 1, 2024 and sell it today you would earn a total of 810.00 from holding Stanley Black Decker or generate 10.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. Stanley Black Decker
Performance |
| Timeline |
| Eastern |
| Stanley Black Decker |
Eastern and Stanley Black Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Stanley Black
The main advantage of trading using opposite Eastern and Stanley Black positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern position performs unexpectedly, Stanley Black 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 Stanley Black will offset losses from the drop in Stanley Black's long position.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF |
| Stanley Black vs. Toro Co | Stanley Black vs. Timken Company | Stanley Black vs. Lincoln Electric Holdings | Stanley Black vs. Kennametal |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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