Correlation Between Eastern and Carbon Revolution

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

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

Diversification Opportunities for Eastern and Carbon Revolution

0.3

Correlation Coefficient

Eastern  Carbon Revolution

Weak diversification

The 3 months correlation between Eastern and Carbon is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Carbon Revolution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Revolution Public and Eastern 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 Eastern Co are associated (or correlated) with Carbon Revolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Revolution Public has no effect on the direction of Eastern i.e., Eastern and Carbon Revolution go up and down completely randomly.

Pair Corralation between Eastern and Carbon Revolution

Considering the 90-day investment horizon Eastern Co is expected to generate 0.44 times more return on investment than Carbon Revolution. However, Eastern Co is 2.29 times less risky than Carbon Revolution. It trades about 0.0 of its potential returns per unit of risk. Carbon Revolution Public is currently generating about -0.25 per unit of risk. If you would invest  2,998  in Eastern Co on September 5, 2024 and sell it today you would lose (36.00) from holding Eastern Co or give up 1.2% of portfolio value over 90 days.

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

Eastern Co  vs.  Carbon Revolution Public

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Eastern is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Carbon Revolution Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carbon Revolution Public has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Eastern and Carbon Revolution

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

The idea behind Eastern Co and Carbon Revolution Public 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.