Correlation Between Eastern Star and Alucon Public

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

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

Diversification Opportunities for Eastern Star and Alucon Public

0.61

Correlation Coefficient

Eastern Star  Alucon Public

Poor diversification

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

Pair Corralation between Eastern Star and Alucon Public

Assuming the 90 days trading horizon Eastern Star Real is expected to under-perform the Alucon Public. In addition to that, Eastern Star is 2.93 times more volatile than Alucon Public. It trades about -0.21 of its total potential returns per unit of risk. Alucon Public is currently generating about 0.06 per unit of volatility. If you would invest  17,000  in Alucon Public on September 28, 2024 and sell it today you would earn a total of  200.00  from holding Alucon Public or generate 1.18% return on investment over 90 days.

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

Eastern Star Real  vs.  Alucon Public

Eastern Star Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Star Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Alucon Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alucon Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alucon Public is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastern Star and Alucon Public

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

The idea behind Eastern Star Real and Alucon 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.