Correlation Between Eastern and Atlantic American

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

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

Diversification Opportunities for Eastern and Atlantic American

0.01

Correlation Coefficient

Eastern  Atlantic American

Significant diversification

The 3 months correlation between Eastern and Atlantic is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Atlantic American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic American and Eastern 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 Eastern Co are associated (or correlated) with Atlantic American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic American has no effect on the direction of Eastern i.e., Eastern and Atlantic American go up and down completely randomly.

Pair Corralation between Eastern and Atlantic American

Considering the 90-day investment horizon Eastern Co is expected to under-perform the Atlantic American. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Co is 2.05 times less risky than Atlantic American. The stock trades about -0.06 of its potential returns per unit of risk. The Atlantic American is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  149.00  in Atlantic American on January 9, 2025 and sell it today you would earn a total of  9.00  from holding Atlantic American or generate 6.04% return on investment over 90 days.

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

Eastern Co  vs.  Atlantic American

Eastern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Atlantic American

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic American are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Atlantic American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern and Atlantic American

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

The idea behind Eastern Co and Atlantic American 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.