Correlation Between Eastroc Beverage and Linewell Software

Can any of the company-specific risk be diversified away by investing in both Eastroc Beverage and Linewell Software 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 Linewell Software 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 Linewell Software Co, you can compare the effects of market volatilities on Eastroc Beverage and Linewell Software 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 Linewell Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and Linewell Software.

Diversification Opportunities for Eastroc Beverage and Linewell Software

0.88

Correlation Coefficient

Eastroc Beverage  Linewell Software

Very poor diversification

The 3 months correlation between Eastroc and Linewell is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Linewell Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linewell Software 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 Linewell Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linewell Software has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Linewell Software go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Linewell Software

Assuming the 90 days trading horizon Eastroc Beverage is expected to generate 1.95 times less return on investment than Linewell Software. But when comparing it to its historical volatility, Eastroc Beverage Group is 1.94 times less risky than Linewell Software. It trades about 0.18 of its potential returns per unit of risk. Linewell Software Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  793.00  in Linewell Software Co on September 4, 2024 and sell it today you would earn a total of  405.00  from holding Linewell Software Co or generate 51.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Eastroc Beverage Group  vs.  Linewell Software Co

Eastroc Beverage

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 14 (%) 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.

Linewell Software

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Linewell Software Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linewell Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastroc Beverage and Linewell Software

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

The idea behind Eastroc Beverage Group and Linewell Software 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.