Correlation Between ESUN Financial and Acelon Chemicals

Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Acelon Chemicals 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 Acelon Chemicals 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 Acelon Chemicals Fiber, you can compare the effects of market volatilities on ESUN Financial and Acelon Chemicals 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 Acelon Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Acelon Chemicals.

Diversification Opportunities for ESUN Financial and Acelon Chemicals

0.68

Correlation Coefficient

ESUN Financial  Acelon Chemicals

Poor diversification

The 3 months correlation between ESUN and Acelon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Acelon Chemicals Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acelon Chemicals Fiber 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 Acelon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acelon Chemicals Fiber has no effect on the direction of ESUN Financial i.e., ESUN Financial and Acelon Chemicals go up and down completely randomly.

Pair Corralation between ESUN Financial and Acelon Chemicals

Assuming the 90 days trading horizon ESUN Financial is expected to generate 5.0 times less return on investment than Acelon Chemicals. But when comparing it to its historical volatility, ESUN Financial Holding is 3.66 times less risky than Acelon Chemicals. It trades about 0.17 of its potential returns per unit of risk. Acelon Chemicals Fiber is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,190  in Acelon Chemicals Fiber on December 24, 2024 and sell it today you would earn a total of  540.00  from holding Acelon Chemicals Fiber or generate 45.38% return on investment over 90 days.

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

ESUN Financial Holding  vs.  Acelon Chemicals Fiber

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 13 (%) 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.

Acelon Chemicals Fiber

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Acelon Chemicals Fiber are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Acelon Chemicals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESUN Financial and Acelon Chemicals

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

The idea behind ESUN Financial Holding and Acelon Chemicals Fiber 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.