Correlation Between Global Ship and Eastern
Can any of the company-specific risk be diversified away by investing in both Global Ship and Eastern 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 Global Ship and Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and Eastern Co, you can compare the effects of market volatilities on Global Ship and Eastern 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 Global Ship with a short position of Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Eastern.
Diversification Opportunities for Global Ship and Eastern
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and Eastern is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and Global Ship 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 Global Ship Lease are associated (or correlated) with Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Global Ship i.e., Global Ship and Eastern go up and down completely randomly.
Pair Corralation between Global Ship and Eastern
Assuming the 90 days trading horizon Global Ship is expected to generate 2.41 times less return on investment than Eastern. But when comparing it to its historical volatility, Global Ship Lease is 3.64 times less risky than Eastern. It trades about 0.06 of its potential returns per unit of risk. Eastern Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,056 in Eastern Co on August 31, 2024 and sell it today you would earn a total of 816.00 from holding Eastern Co or generate 39.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. Eastern Co
Performance |
| Timeline |
| Global Ship Lease |
| Eastern |
Global Ship and Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and Eastern
The main advantage of trading using opposite Global Ship and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship position performs unexpectedly, Eastern 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 Eastern will offset losses from the drop in Eastern's long position.The idea behind Global Ship Lease and Eastern Co 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.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern 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 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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