Correlation Between Gem Year and Eastern Communications

Can any of the company-specific risk be diversified away by investing in both Gem Year and Eastern Communications 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 Gem Year and Eastern Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gem Year Industrial Co and Eastern Communications Co, you can compare the effects of market volatilities on Gem Year and Eastern Communications 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 Gem Year with a short position of Eastern Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gem Year and Eastern Communications.

Diversification Opportunities for Gem Year and Eastern Communications

0.81

Correlation Coefficient

Gem Year  Eastern Communications

Very poor diversification

The 3 months correlation between Gem and Eastern is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gem Year Industrial Co and Eastern Communications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Communications and Gem Year 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 Gem Year Industrial Co are associated (or correlated) with Eastern Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Communications has no effect on the direction of Gem Year i.e., Gem Year and Eastern Communications go up and down completely randomly.

Pair Corralation between Gem Year and Eastern Communications

Assuming the 90 days trading horizon Gem Year Industrial Co is expected to generate 1.18 times more return on investment than Eastern Communications. However, Gem Year is 1.18 times more volatile than Eastern Communications Co. It trades about 0.14 of its potential returns per unit of risk. Eastern Communications Co is currently generating about 0.11 per unit of risk. If you would invest  296.00  in Gem Year Industrial Co on September 28, 2024 and sell it today you would earn a total of  142.00  from holding Gem Year Industrial Co or generate 47.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Gem Year Industrial Co  vs.  Eastern Communications Co

Gem Year Industrial

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gem Year Industrial Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gem Year sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastern Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Communications Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastern Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gem Year and Eastern Communications

The main advantage of trading using opposite Gem Year and Eastern Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gem Year position performs unexpectedly, Eastern Communications 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 Communications will offset losses from the drop in Eastern Communications' long position.

The idea behind Gem Year Industrial Co and Eastern Communications 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.

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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.