Correlation Between East West and Hi Tech
Can any of the company-specific risk be diversified away by investing in both East West and Hi Tech 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 Hi Tech 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 Hi Tech Lubricants, you can compare the effects of market volatilities on East West and Hi Tech 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 Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Hi Tech.
Diversification Opportunities for East West and Hi Tech
Significant diversification
The 3 months correlation between East and HTL is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding East West Insurance and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants 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 Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of East West i.e., East West and Hi Tech go up and down completely randomly.
Pair Corralation between East West and Hi Tech
Assuming the 90 days trading horizon East West Insurance is expected to generate 1.27 times more return on investment than Hi Tech. However, East West is 1.27 times more volatile than Hi Tech Lubricants. It trades about 0.08 of its potential returns per unit of risk. Hi Tech Lubricants is currently generating about 0.06 per unit of risk. If you would invest 4,795 in East West Insurance on October 30, 2024 and sell it today you would earn a total of 934.00 from holding East West Insurance or generate 19.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 15.77% |
| Values | Daily Returns |
East West Insurance vs. Hi Tech Lubricants
Performance |
| Timeline |
| East West Insurance |
| Hi Tech Lubricants |
East West and Hi Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Hi Tech
The main advantage of trading using opposite East West and Hi Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Hi Tech 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 Hi Tech will offset losses from the drop in Hi Tech's long position.| East West vs. Crescent Star Insurance | East West vs. National Foods | East West vs. Century Insurance | East West vs. Bank of Punjab |
| Hi Tech vs. Fauji Foods | Hi Tech vs. Shifa International Hospitals | Hi Tech vs. Pakistan Telecommunication | Hi Tech vs. Data Agro |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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