Correlation Between E Split and Big Rock

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

By analyzing existing cross correlation between E Split Corp and Big Rock Brewery, you can compare the effects of market volatilities on E Split and Big Rock 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 E Split with a short position of Big Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Split and Big Rock.

Diversification Opportunities for E Split and Big Rock

-0.34

Correlation Coefficient

E Split  Big Rock

Very good diversification

The 3 months correlation between ENS-PA and Big is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding E Split Corp and Big Rock Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Rock Brewery and E Split 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 E Split Corp are associated (or correlated) with Big Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Rock Brewery has no effect on the direction of E Split i.e., E Split and Big Rock go up and down completely randomly.

Pair Corralation between E Split and Big Rock

Assuming the 90 days trading horizon E Split Corp is expected to generate 0.11 times more return on investment than Big Rock. However, E Split Corp is 9.21 times less risky than Big Rock. It trades about 0.17 of its potential returns per unit of risk. Big Rock Brewery is currently generating about 0.01 per unit of risk. If you would invest  1,043  in E Split Corp on September 23, 2024 and sell it today you would earn a total of  76.00  from holding E Split Corp or generate 7.29% return on investment over 90 days.

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

E Split Corp  vs.  Big Rock Brewery

E Split Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E Split Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, E Split may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with E Split and Big Rock

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

The idea behind E Split Corp and Big Rock Brewery 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.