Correlation Between Eaco Corp and SmartKem, Common

Can any of the company-specific risk be diversified away by investing in both Eaco Corp and SmartKem, Common 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 Eaco Corp and SmartKem, Common into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eaco Corp and SmartKem, Common Stock, you can compare the effects of market volatilities on Eaco Corp and SmartKem, Common 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 Eaco Corp with a short position of SmartKem, Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaco Corp and SmartKem, Common.

Diversification Opportunities for Eaco Corp and SmartKem, Common

-0.49

Correlation Coefficient

Eaco Corp  SmartKem, Common

Very good diversification

The 3 months correlation between Eaco and SmartKem, is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Eaco Corp and SmartKem, Common Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartKem, Common Stock and Eaco Corp 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 Eaco Corp are associated (or correlated) with SmartKem, Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartKem, Common Stock has no effect on the direction of Eaco Corp i.e., Eaco Corp and SmartKem, Common go up and down completely randomly.

Pair Corralation between Eaco Corp and SmartKem, Common

If you would invest  461.00  in SmartKem, Common Stock on September 22, 2024 and sell it today you would lose (165.00) from holding SmartKem, Common Stock or give up 35.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Eaco Corp  vs.  SmartKem, Common Stock

Eaco Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaco Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Eaco Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

SmartKem, Common Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartKem, Common Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating basic indicators, SmartKem, Common may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eaco Corp and SmartKem, Common

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

The idea behind Eaco Corp and SmartKem, Common Stock 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.