Correlation Between ESUN Financial and MedFirst Healthcare

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

Diversification Opportunities for ESUN Financial and MedFirst Healthcare

0.55

Correlation Coefficient

ESUN Financial  MedFirst Healthcare

Very weak diversification

The 3 months correlation between ESUN and MedFirst is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and MedFirst Healthcare Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedFirst Healthcare 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 MedFirst Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedFirst Healthcare has no effect on the direction of ESUN Financial i.e., ESUN Financial and MedFirst Healthcare go up and down completely randomly.

Pair Corralation between ESUN Financial and MedFirst Healthcare

Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 1.21 times more return on investment than MedFirst Healthcare. However, ESUN Financial is 1.21 times more volatile than MedFirst Healthcare Services. It trades about 0.05 of its potential returns per unit of risk. MedFirst Healthcare Services is currently generating about -0.36 per unit of risk. If you would invest  2,715  in ESUN Financial Holding on September 17, 2024 and sell it today you would earn a total of  20.00  from holding ESUN Financial Holding or generate 0.74% return on investment over 90 days.

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

ESUN Financial Holding  vs.  MedFirst Healthcare Services

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.

MedFirst Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MedFirst Healthcare Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with ESUN Financial and MedFirst Healthcare

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

The idea behind ESUN Financial Holding and MedFirst Healthcare Services 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.