Correlation Between HE Equipment and Eastern
Can any of the company-specific risk be diversified away by investing in both HE Equipment 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 HE Equipment and Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and Eastern Co, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Eastern.
Diversification Opportunities for HE Equipment and Eastern
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HEES and Eastern is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Eastern go up and down completely randomly.
Pair Corralation between HE Equipment and Eastern
Given the investment horizon of 90 days HE Equipment Services is expected to generate 1.23 times more return on investment than Eastern. However, HE Equipment is 1.23 times more volatile than Eastern Co. It trades about 0.21 of its potential returns per unit of risk. Eastern Co is currently generating about -0.12 per unit of risk. If you would invest 5,225 in HE Equipment Services on September 1, 2024 and sell it today you would earn a total of 749.00 from holding HE Equipment Services or generate 14.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HE Equipment Services vs. Eastern Co
Performance |
| Timeline |
| HE Equipment Services |
| Eastern |
HE Equipment and Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and Eastern
The main advantage of trading using opposite HE Equipment and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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.| HE Equipment vs. McGrath RentCorp | HE Equipment vs. Herc Holdings | HE Equipment vs. PROG Holdings | HE Equipment vs. Custom Truck One |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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