Correlation Between Cars and Eastern

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

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

Diversification Opportunities for Cars and Eastern

-0.77

Correlation Coefficient

Cars  Eastern

Pay attention - limited upside

The 3 months correlation between Cars and Eastern is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and Cars 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 Cars Inc are associated (or correlated) with Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Cars i.e., Cars and Eastern go up and down completely randomly.

Pair Corralation between Cars and Eastern

Given the investment horizon of 90 days Cars is expected to generate 1.01 times less return on investment than Eastern. But when comparing it to its historical volatility, Cars Inc is 1.1 times less risky than Eastern. It trades about 0.05 of its potential returns per unit of risk. Eastern Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,021  in Eastern Co on January 29, 2024 and sell it today you would earn a total of  1,210  from holding Eastern Co or generate 59.87% return on investment over 90 days.

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

Cars Inc  vs.  Eastern Co

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Eastern

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady primary indicators, Eastern disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cars and Eastern

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

The idea behind Cars Inc and Eastern Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.