Correlation Between Eastfield Resources and Universal Systems

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

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

Diversification Opportunities for Eastfield Resources and Universal Systems

-0.35

Correlation Coefficient

Eastfield Resources  Universal Systems

Very good diversification

The 3 months correlation between Eastfield and Universal is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eastfield Resources and Universal Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Systems and Eastfield Resources 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 Eastfield Resources are associated (or correlated) with Universal Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Systems has no effect on the direction of Eastfield Resources i.e., Eastfield Resources and Universal Systems go up and down completely randomly.

Pair Corralation between Eastfield Resources and Universal Systems

Assuming the 90 days horizon Eastfield Resources is expected to generate 0.75 times more return on investment than Universal Systems. However, Eastfield Resources is 1.33 times less risky than Universal Systems. It trades about 0.04 of its potential returns per unit of risk. Universal Systems is currently generating about 0.03 per unit of risk. If you would invest  4.82  in Eastfield Resources on February 26, 2024 and sell it today you would lose (2.30) from holding Eastfield Resources or give up 47.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Eastfield Resources  vs.  Universal Systems

Eastfield Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eastfield Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Eastfield Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Eastfield Resources and Universal Systems

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

The idea behind Eastfield Resources and Universal Systems 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.