Correlation Between Tandy Leather and Eshallgo

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

By analyzing existing cross correlation between Tandy Leather Factory and Eshallgo Class A, you can compare the effects of market volatilities on Tandy Leather and Eshallgo 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 Tandy Leather with a short position of Eshallgo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tandy Leather and Eshallgo.

Diversification Opportunities for Tandy Leather and Eshallgo

-0.15

Correlation Coefficient

Tandy Leather  Eshallgo

Good diversification

The 3 months correlation between Tandy and Eshallgo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and Eshallgo Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eshallgo Class A and Tandy Leather 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 Tandy Leather Factory are associated (or correlated) with Eshallgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eshallgo Class A has no effect on the direction of Tandy Leather i.e., Tandy Leather and Eshallgo go up and down completely randomly.

Pair Corralation between Tandy Leather and Eshallgo

Considering the 90-day investment horizon Tandy Leather Factory is expected to under-perform the Eshallgo. But the stock apears to be less risky and, when comparing its historical volatility, Tandy Leather Factory is 4.08 times less risky than Eshallgo. The stock trades about -0.14 of its potential returns per unit of risk. The Eshallgo Class A is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  335.00  in Eshallgo Class A on September 4, 2024 and sell it today you would earn a total of  71.00  from holding Eshallgo Class A or generate 21.19% return on investment over 90 days.

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

Tandy Leather Factory  vs.  Eshallgo Class A

Tandy Leather Factory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tandy Leather Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Tandy Leather is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Eshallgo Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eshallgo Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Eshallgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tandy Leather and Eshallgo

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

The idea behind Tandy Leather Factory and Eshallgo Class A 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.