Correlation Between Techtronic Industries and Eastern

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

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

Diversification Opportunities for Techtronic Industries and Eastern

0.82

Correlation Coefficient

Techtronic Industries  Eastern

Very poor diversification

The 3 months correlation between Techtronic and Eastern is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Techtronic Industries Ltd and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and Techtronic Industries 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 Techtronic Industries Ltd 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 Techtronic Industries i.e., Techtronic Industries and Eastern go up and down completely randomly.

Pair Corralation between Techtronic Industries and Eastern

Assuming the 90 days horizon Techtronic Industries Ltd is expected to generate 0.79 times more return on investment than Eastern. However, Techtronic Industries Ltd is 1.27 times less risky than Eastern. It trades about -0.17 of its potential returns per unit of risk. Eastern Co is currently generating about -0.22 per unit of risk. If you would invest  7,051  in Techtronic Industries Ltd on October 1, 2024 and sell it today you would lose (456.00) from holding Techtronic Industries Ltd or give up 6.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Techtronic Industries Ltd  vs.  Eastern Co

Techtronic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Techtronic Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly 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.

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Techtronic Industries and Eastern

The main advantage of trading using opposite Techtronic Industries and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Techtronic Industries 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 Techtronic Industries Ltd 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.