Correlation Between ESUN Financial and Wei Chuan
Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Wei Chuan 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 ESUN Financial and Wei Chuan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESUN Financial Holding and Wei Chuan Foods, you can compare the effects of market volatilities on ESUN Financial and Wei Chuan 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 ESUN Financial with a short position of Wei Chuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Wei Chuan.
Diversification Opportunities for ESUN Financial and Wei Chuan
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ESUN and Wei is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Wei Chuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chuan Foods and ESUN Financial 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 ESUN Financial Holding are associated (or correlated) with Wei Chuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chuan Foods has no effect on the direction of ESUN Financial i.e., ESUN Financial and Wei Chuan go up and down completely randomly.
Pair Corralation between ESUN Financial and Wei Chuan
Assuming the 90 days trading horizon ESUN Financial Holding is expected to under-perform the Wei Chuan. In addition to that, ESUN Financial is 1.78 times more volatile than Wei Chuan Foods. It trades about -0.09 of its total potential returns per unit of risk. Wei Chuan Foods is currently generating about -0.05 per unit of volatility. If you would invest 1,805 in Wei Chuan Foods on September 24, 2024 and sell it today you would lose (30.00) from holding Wei Chuan Foods or give up 1.66% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
ESUN Financial Holding vs. Wei Chuan Foods
Performance |
Timeline |
ESUN Financial Holding |
Wei Chuan Foods |
ESUN Financial and Wei Chuan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ESUN Financial and Wei Chuan
The main advantage of trading using opposite ESUN Financial and Wei Chuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial position performs unexpectedly, Wei Chuan 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 Wei Chuan will offset losses from the drop in Wei Chuan's long position.ESUN Financial vs. Mega Financial Holding | ||
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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