Correlation Between ES Ceramics and United Plantations

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

By analyzing existing cross correlation between ES Ceramics Technology and United Plantations Bhd, you can compare the effects of market volatilities on ES Ceramics and United Plantations 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 ES Ceramics with a short position of United Plantations. Check out your portfolio center. Please also check ongoing floating volatility patterns of ES Ceramics and United Plantations.

Diversification Opportunities for ES Ceramics and United Plantations

0.27

Correlation Coefficient

ES Ceramics  United Plantations

Modest diversification

The 3 months correlation between 0100 and United is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and United Plantations Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Plantations Bhd and ES Ceramics 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 ES Ceramics Technology are associated (or correlated) with United Plantations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Plantations Bhd has no effect on the direction of ES Ceramics i.e., ES Ceramics and United Plantations go up and down completely randomly.

Pair Corralation between ES Ceramics and United Plantations

Assuming the 90 days trading horizon ES Ceramics Technology is expected to under-perform the United Plantations. In addition to that, ES Ceramics is 2.78 times more volatile than United Plantations Bhd. It trades about -0.01 of its total potential returns per unit of risk. United Plantations Bhd is currently generating about 0.19 per unit of volatility. If you would invest  1,546  in United Plantations Bhd on October 5, 2024 and sell it today you would earn a total of  1,554  from holding United Plantations Bhd or generate 100.52% return on investment over 90 days.

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

ES Ceramics Technology  vs.  United Plantations Bhd

ES Ceramics Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ES Ceramics Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ES Ceramics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

United Plantations Bhd

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Plantations Bhd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, United Plantations disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ES Ceramics and United Plantations

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

The idea behind ES Ceramics Technology and United Plantations Bhd 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.