Correlation Between Malacca Straits and East Resources

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

By analyzing existing cross correlation between Malacca Straits Acquisition and East Resources Acquisition, you can compare the effects of market volatilities on Malacca Straits and East Resources 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 Malacca Straits with a short position of East Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malacca Straits and East Resources.

Diversification Opportunities for Malacca Straits and East Resources

-0.45

Correlation Coefficient

Malacca Straits  East Resources

Very good diversification

The 3 months correlation between Malacca and East is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Malacca Straits Acquisition and East Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Resources Acqui and Malacca Straits 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 Malacca Straits Acquisition are associated (or correlated) with East Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Resources Acqui has no effect on the direction of Malacca Straits i.e., Malacca Straits and East Resources go up and down completely randomly.

Pair Corralation between Malacca Straits and East Resources

If you would invest  28.00  in East Resources Acquisition on September 17, 2024 and sell it today you would earn a total of  0.00  from holding East Resources Acquisition or generate 0.0% return on investment over 90 days.

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

Malacca Straits Acquisition  vs.  East Resources Acquisition

Malacca Straits Acqu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malacca Straits Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Malacca Straits is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

East Resources Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Resources Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, East Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Malacca Straits and East Resources

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

The idea behind Malacca Straits Acquisition and East Resources Acquisition 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.