Correlation Between ES Ceramics and Alliance Financial

Can any of the company-specific risk be diversified away by investing in both ES Ceramics and Alliance 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 ES Ceramics and Alliance Financial 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 Alliance Financial Group, you can compare the effects of market volatilities on ES Ceramics and Alliance 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 ES Ceramics with a short position of Alliance Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ES Ceramics and Alliance Financial.

Diversification Opportunities for ES Ceramics and Alliance Financial

-0.37

Correlation Coefficient

ES Ceramics  Alliance Financial

Very good diversification

The 3 months correlation between 0100 and Alliance is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial 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 Alliance Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Financial has no effect on the direction of ES Ceramics i.e., ES Ceramics and Alliance Financial go up and down completely randomly.

Pair Corralation between ES Ceramics and Alliance Financial

Assuming the 90 days trading horizon ES Ceramics Technology is expected to under-perform the Alliance Financial. In addition to that, ES Ceramics is 2.37 times more volatile than Alliance Financial Group. It trades about -0.03 of its total potential returns per unit of risk. Alliance Financial Group is currently generating about 0.12 per unit of volatility. If you would invest  431.00  in Alliance Financial Group on September 4, 2024 and sell it today you would earn a total of  52.00  from holding Alliance Financial Group or generate 12.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

ES Ceramics Technology  vs.  Alliance Financial Group

ES Ceramics Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alliance Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alliance Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ES Ceramics and Alliance Financial

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

The idea behind ES Ceramics Technology and Alliance Financial Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.