Correlation Between ESUN Financial and Bank of Kaohsiung

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

Diversification Opportunities for ESUN Financial and Bank of Kaohsiung

0.73

Correlation Coefficient

ESUN Financial  Bank of Kaohsiung

Poor diversification

The 3 months correlation between ESUN and Bank is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Bank of Kaohsiung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Kaohsiung 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 Bank of Kaohsiung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Kaohsiung has no effect on the direction of ESUN Financial i.e., ESUN Financial and Bank of Kaohsiung go up and down completely randomly.

Pair Corralation between ESUN Financial and Bank of Kaohsiung

Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 1.19 times more return on investment than Bank of Kaohsiung. However, ESUN Financial is 1.19 times more volatile than Bank of Kaohsiung. It trades about 0.03 of its potential returns per unit of risk. Bank of Kaohsiung is currently generating about -0.02 per unit of risk. If you would invest  2,540  in ESUN Financial Holding on October 9, 2024 and sell it today you would earn a total of  170.00  from holding ESUN Financial Holding or generate 6.69% 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.  Bank of Kaohsiung

ESUN Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bank of Kaohsiung

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ESUN Financial and Bank of Kaohsiung

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

The idea behind ESUN Financial Holding and Bank of Kaohsiung 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.