Correlation Between ESUN Financial and EnTie Commercial

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

Diversification Opportunities for ESUN Financial and EnTie Commercial

-0.03

Correlation Coefficient

ESUN Financial  EnTie Commercial

Good diversification

The 3 months correlation between ESUN and EnTie is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and EnTie Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnTie Commercial Bank 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 EnTie Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnTie Commercial Bank has no effect on the direction of ESUN Financial i.e., ESUN Financial and EnTie Commercial go up and down completely randomly.

Pair Corralation between ESUN Financial and EnTie Commercial

Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 1.18 times more return on investment than EnTie Commercial. However, ESUN Financial is 1.18 times more volatile than EnTie Commercial Bank. It trades about 0.25 of its potential returns per unit of risk. EnTie Commercial Bank is currently generating about 0.17 per unit of risk. If you would invest  2,800  in ESUN Financial Holding on December 4, 2024 and sell it today you would earn a total of  145.00  from holding ESUN Financial Holding or generate 5.18% return on investment over 90 days.

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

ESUN Financial Holding  vs.  EnTie Commercial Bank

ESUN Financial Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESUN Financial Holding are ranked lower than 11 (%) 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.

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.

Pair Trading with ESUN Financial and EnTie Commercial

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

The idea behind ESUN Financial Holding and EnTie Commercial Bank 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 Transaction History module to view history of all your transactions and understand their impact on performance.