Correlation Between EnTie Commercial and ESUN Financial

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

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

Diversification Opportunities for EnTie Commercial and ESUN Financial

0.68

Correlation Coefficient

EnTie Commercial  ESUN Financial

Poor diversification

The 3 months correlation between EnTie and ESUN is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding EnTie Commercial Bank 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 EnTie Commercial 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 EnTie Commercial Bank 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 EnTie Commercial i.e., EnTie Commercial and ESUN Financial go up and down completely randomly.

Pair Corralation between EnTie Commercial and ESUN Financial

Assuming the 90 days trading horizon EnTie Commercial is expected to generate 164.3 times less return on investment than ESUN Financial. In addition to that, EnTie Commercial is 1.42 times more volatile than ESUN Financial Holding. It trades about 0.0 of its total potential returns per unit of risk. ESUN Financial Holding is currently generating about 0.19 per unit of volatility. If you would invest  2,710  in ESUN Financial Holding on December 29, 2024 and sell it today you would earn a total of  255.00  from holding ESUN Financial Holding or generate 9.41% return on investment over 90 days.

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

EnTie Commercial Bank  vs.  ESUN Financial Holding

EnTie Commercial Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days EnTie Commercial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EnTie Commercial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ESUN Financial Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESUN Financial Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ESUN Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EnTie Commercial and ESUN Financial

The main advantage of trading using opposite EnTie Commercial and ESUN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnTie Commercial 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 EnTie Commercial Bank 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.