Correlation Between Eq Energy and Suntory Beverage

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

By analyzing existing cross correlation between Eq Energy Drink and Suntory Beverage Food, you can compare the effects of market volatilities on Eq Energy and Suntory Beverage 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 Eq Energy with a short position of Suntory Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eq Energy and Suntory Beverage.

Diversification Opportunities for Eq Energy and Suntory Beverage

0.61

Correlation Coefficient

Eq Energy  Suntory Beverage

Poor diversification

The 3 months correlation between EQLB and Suntory is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Eq Energy Drink and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food and Eq Energy 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 Eq Energy Drink are associated (or correlated) with Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Eq Energy i.e., Eq Energy and Suntory Beverage go up and down completely randomly.

Pair Corralation between Eq Energy and Suntory Beverage

Given the investment horizon of 90 days Eq Energy Drink is expected to generate 13.78 times more return on investment than Suntory Beverage. However, Eq Energy is 13.78 times more volatile than Suntory Beverage Food. It trades about 0.12 of its potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.02 per unit of risk. If you would invest  0.06  in Eq Energy Drink on September 2, 2024 and sell it today you would earn a total of  0.02  from holding Eq Energy Drink or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Eq Energy Drink  vs.  Suntory Beverage Food

Eq Energy Drink

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eq Energy Drink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Eq Energy and Suntory Beverage

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

The idea behind Eq Energy Drink and Suntory Beverage Food 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.