Correlation Between Malacca Straits and East Resources
Can any of the company-specific risk be diversified away by investing in both Malacca Straits and East Resources 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 Malacca Straits and East Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Malacca Straits Acquisition and East Resources Acquisition, you can compare the effects of market volatilities on Malacca Straits and East Resources 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 Malacca Straits with a short position of East Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malacca Straits and East Resources.
Diversification Opportunities for Malacca Straits and East Resources
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Malacca and East is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Malacca Straits Acquisition and East Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Resources Acqui and Malacca Straits 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 Malacca Straits Acquisition are associated (or correlated) with East Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Resources Acqui has no effect on the direction of Malacca Straits i.e., Malacca Straits and East Resources go up and down completely randomly.
Pair Corralation between Malacca Straits and East Resources
Given the investment horizon of 90 days Malacca Straits Acquisition is expected to generate 0.18 times more return on investment than East Resources. However, Malacca Straits Acquisition is 5.47 times less risky than East Resources. It trades about 0.05 of its potential returns per unit of risk. East Resources Acquisition is currently generating about 0.01 per unit of risk. If you would invest 1,020 in Malacca Straits Acquisition on September 5, 2024 and sell it today you would earn a total of 33.00 from holding Malacca Straits Acquisition or generate 3.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 92.7% |
| Values | Daily Returns |
Malacca Straits Acquisition vs. East Resources Acquisition
Performance |
| Timeline |
| Malacca Straits Acqu |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| East Resources Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Malacca Straits and East Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Malacca Straits and East Resources
The main advantage of trading using opposite Malacca Straits and East Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malacca Straits position performs unexpectedly, East Resources 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 East Resources will offset losses from the drop in East Resources' long position.| Malacca Straits vs. Hudson Acquisition I | Malacca Straits vs. Alpha One | Malacca Straits vs. Manaris Corp | Malacca Straits vs. Marblegate Acquisition Corp |
| East Resources vs. Olympic Steel | East Resources vs. Aegon NV ADR | East Resources vs. Western Copper and | East Resources vs. SEI Investments |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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