Correlation Between Eastroc Beverage and Advanced Technology

Can any of the company-specific risk be diversified away by investing in both Eastroc Beverage and Advanced Technology 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 Eastroc Beverage and Advanced Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastroc Beverage Group and Advanced Technology Materials, you can compare the effects of market volatilities on Eastroc Beverage and Advanced Technology 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 Eastroc Beverage with a short position of Advanced Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and Advanced Technology.

Diversification Opportunities for Eastroc Beverage and Advanced Technology

0.78

Correlation Coefficient

Eastroc Beverage  Advanced Technology

Poor diversification

The 3 months correlation between Eastroc and Advanced is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Advanced Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Technology and Eastroc Beverage 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 Eastroc Beverage Group are associated (or correlated) with Advanced Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Technology has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Advanced Technology go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Advanced Technology

Assuming the 90 days trading horizon Eastroc Beverage is expected to generate 1.12 times less return on investment than Advanced Technology. But when comparing it to its historical volatility, Eastroc Beverage Group is 1.47 times less risky than Advanced Technology. It trades about 0.28 of its potential returns per unit of risk. Advanced Technology Materials is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  786.00  in Advanced Technology Materials on September 15, 2024 and sell it today you would earn a total of  393.00  from holding Advanced Technology Materials or generate 50.0% return on investment over 90 days.

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

Eastroc Beverage Group  vs.  Advanced Technology Materials

Eastroc Beverage

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Advanced Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Technology Materials are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastroc Beverage and Advanced Technology

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

The idea behind Eastroc Beverage Group and Advanced Technology Materials 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.