Correlation Between East Resources and Better World
Can any of the company-specific risk be diversified away by investing in both East Resources and Better World 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 East Resources and Better World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Resources Acquisition and Better World Acquisition, you can compare the effects of market volatilities on East Resources and Better World 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 East Resources with a short position of Better World. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Resources and Better World.
Diversification Opportunities for East Resources and Better World
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between East and Better is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding East Resources Acquisition and Better World Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better World Acquisition and East Resources 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 East Resources Acquisition are associated (or correlated) with Better World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better World Acquisition has no effect on the direction of East Resources i.e., East Resources and Better World go up and down completely randomly.
Pair Corralation between East Resources and Better World
Assuming the 90 days horizon East Resources Acquisition is expected to generate 2.81 times more return on investment than Better World. However, East Resources is 2.81 times more volatile than Better World Acquisition. It trades about 0.01 of its potential returns per unit of risk. Better World Acquisition is currently generating about -0.03 per unit of risk. If you would invest 1,014 in East Resources Acquisition on September 3, 2024 and sell it today you would lose (14.00) from holding East Resources Acquisition or give up 1.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.45% |
| Values | Daily Returns |
East Resources Acquisition vs. Better World Acquisition
Performance |
| Timeline |
| East Resources Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Better World Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
East Resources and Better World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Resources and Better World
The main advantage of trading using opposite East Resources and Better World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Resources position performs unexpectedly, Better World 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 Better World will offset losses from the drop in Better World's long position.| East Resources vs. Cheniere Energy Partners | East Resources vs. Vistra Energy Corp | East Resources vs. Atmos Energy | East Resources vs. CenterPoint Energy |
| Better World vs. Biglari Holdings | Better World vs. Kura Sushi USA | Better World vs. Iridium Communications | Better World vs. First Watch Restaurant |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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