Correlation Between Eastern and Verde Clean

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

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

Diversification Opportunities for Eastern and Verde Clean

-0.09

Correlation Coefficient

Eastern  Verde Clean

Good diversification

The 3 months correlation between Eastern and Verde is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels 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 Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of Eastern i.e., Eastern and Verde Clean go up and down completely randomly.

Pair Corralation between Eastern and Verde Clean

Considering the 90-day investment horizon Eastern Co is expected to under-perform the Verde Clean. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Co is 59.98 times less risky than Verde Clean. The stock trades about -0.01 of its potential returns per unit of risk. The Verde Clean Fuels is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Verde Clean Fuels on September 1, 2024 and sell it today you would earn a total of  2.00  from holding Verde Clean Fuels or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

Eastern Co  vs.  Verde Clean Fuels

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Verde Clean Fuels

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verde Clean Fuels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Verde Clean showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern and Verde Clean

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

The idea behind Eastern Co and Verde Clean Fuels 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.