Correlation Between Emerging Display and ESUN Financial

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

By analyzing existing cross correlation between Emerging Display Technologies and ESUN Financial Holding, you can compare the effects of market volatilities on Emerging Display and ESUN Financial 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 Emerging Display with a short position of ESUN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Display and ESUN Financial.

Diversification Opportunities for Emerging Display and ESUN Financial

-0.62

Correlation Coefficient

Emerging Display  ESUN Financial

Excellent diversification

The 3 months correlation between Emerging and ESUN is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Display Technologies and ESUN Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESUN Financial Holding and Emerging Display 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 Emerging Display Technologies are associated (or correlated) with ESUN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESUN Financial Holding has no effect on the direction of Emerging Display i.e., Emerging Display and ESUN Financial go up and down completely randomly.

Pair Corralation between Emerging Display and ESUN Financial

Assuming the 90 days trading horizon Emerging Display is expected to generate 2.17 times less return on investment than ESUN Financial. But when comparing it to its historical volatility, Emerging Display Technologies is 1.24 times less risky than ESUN Financial. It trades about 0.16 of its potential returns per unit of risk. ESUN Financial Holding is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,650  in ESUN Financial Holding on February 17, 2024 and sell it today you would earn a total of  180.00  from holding ESUN Financial Holding or generate 6.79% return on investment over 90 days.

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

Emerging Display Technologies  vs.  ESUN Financial Holding

Emerging Display Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerging Display Technologies 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 fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

ESUN Financial Holding

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ESUN Financial Holding are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ESUN Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerging Display and ESUN Financial

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

The idea behind Emerging Display Technologies and ESUN Financial Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.