Correlation Between ESUN Financial and United Orthopedic

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

Diversification Opportunities for ESUN Financial and United Orthopedic

0.03

Correlation Coefficient

ESUN Financial  United Orthopedic

Significant diversification

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

Pair Corralation between ESUN Financial and United Orthopedic

Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 1.05 times more return on investment than United Orthopedic. However, ESUN Financial is 1.05 times more volatile than United Orthopedic. It trades about 0.19 of its potential returns per unit of risk. United Orthopedic is currently generating about -0.06 per unit of risk. 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	Insignificant
Accuracy	98.25%
Values	Daily Returns

ESUN Financial Holding  vs.  United Orthopedic

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.

United Orthopedic

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Orthopedic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, United Orthopedic 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 United Orthopedic

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

The idea behind ESUN Financial Holding and United Orthopedic 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.