Correlation Between Eastern and Global E

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

By analyzing existing cross correlation between Eastern Co and Global E Online, you can compare the effects of market volatilities on Eastern and Global E 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 Global E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Global E.

Diversification Opportunities for Eastern and Global E

-0.62

Correlation Coefficient

Eastern  Global E

Excellent diversification

The 3 months correlation between Eastern and Global is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Global E Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Online 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 Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Online has no effect on the direction of Eastern i.e., Eastern and Global E go up and down completely randomly.

Pair Corralation between Eastern and Global E

Considering the 90-day investment horizon Eastern Co is expected to under-perform the Global E. In addition to that, Eastern is 1.55 times more volatile than Global E Online. It trades about -0.06 of its total potential returns per unit of risk. Global E Online is currently generating about 0.18 per unit of volatility. If you would invest  5,202  in Global E Online on September 25, 2024 and sell it today you would earn a total of  304.00  from holding Global E Online or generate 5.84% return on investment over 90 days.

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

Eastern Co  vs.  Global E Online

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 weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Global E Online

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern and Global E

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

The idea behind Eastern Co and Global E Online 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.