Correlation Between AB SKF and Eastern
Can any of the company-specific risk be diversified away by investing in both AB SKF 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 AB SKF and Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB SKF and Eastern Co, you can compare the effects of market volatilities on AB SKF 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 AB SKF with a short position of Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB SKF and Eastern.
Diversification Opportunities for AB SKF and Eastern
Average diversification
The 3 months correlation between SKFRY and Eastern is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and AB SKF 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 AB SKF 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 AB SKF i.e., AB SKF and Eastern go up and down completely randomly.
Pair Corralation between AB SKF and Eastern
Assuming the 90 days horizon AB SKF is expected to generate 0.7 times more return on investment than Eastern. However, AB SKF is 1.44 times less risky than Eastern. It trades about 0.33 of its potential returns per unit of risk. Eastern Co is currently generating about 0.11 per unit of risk. If you would invest 1,878 in AB SKF on November 2, 2024 and sell it today you would earn a total of 182.00 from holding AB SKF or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB SKF vs. Eastern Co
Performance |
| Timeline |
| AB SKF |
| Eastern |
AB SKF and Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB SKF and Eastern
The main advantage of trading using opposite AB SKF and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB SKF 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.| AB SKF vs. Eastern Co | AB SKF vs. Hillman Solutions Corp | AB SKF vs. Techtronic Industries Ltd | AB SKF vs. Husqvarna AB |
| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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