Correlation Between East West and Beco Steel
Can any of the company-specific risk be diversified away by investing in both East West and Beco Steel 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 West and Beco Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Insurance and Beco Steel, you can compare the effects of market volatilities on East West and Beco Steel 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 West with a short position of Beco Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Beco Steel.
Diversification Opportunities for East West and Beco Steel
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between East and Beco is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding East West Insurance and Beco Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beco Steel and East West 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 West Insurance are associated (or correlated) with Beco Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beco Steel has no effect on the direction of East West i.e., East West and Beco Steel go up and down completely randomly.
Pair Corralation between East West and Beco Steel
Assuming the 90 days trading horizon East West Insurance is expected to under-perform the Beco Steel. In addition to that, East West is 1.71 times more volatile than Beco Steel. It trades about -0.19 of its total potential returns per unit of risk. Beco Steel is currently generating about -0.03 per unit of volatility. If you would invest 1,188 in Beco Steel on August 28, 2024 and sell it today you would lose (588.00) from holding Beco Steel or give up 49.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 11.16% |
| Values | Daily Returns |
East West Insurance vs. Beco Steel
Performance |
| Timeline |
| East West Insurance |
| Beco Steel |
East West and Beco Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Beco Steel
The main advantage of trading using opposite East West and Beco Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Beco Steel 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 Beco Steel will offset losses from the drop in Beco Steel's long position.| East West vs. Habib Insurance | East West vs. Century Insurance | East West vs. Reliance Weaving Mills | East West vs. Media Times |
| Beco Steel vs. Habib Insurance | Beco Steel vs. Century Insurance | Beco Steel vs. Reliance Weaving Mills | Beco Steel vs. Media Times |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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