Correlation Between ESUN Financial and APEX International

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

Diversification Opportunities for ESUN Financial and APEX International

0.16

Correlation Coefficient

ESUN Financial  APEX International

Average diversification

The 3 months correlation between ESUN and APEX is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and APEX International Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APEX International 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 APEX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APEX International has no effect on the direction of ESUN Financial i.e., ESUN Financial and APEX International go up and down completely randomly.

Pair Corralation between ESUN Financial and APEX International

Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 0.38 times more return on investment than APEX International. However, ESUN Financial Holding is 2.64 times less risky than APEX International. It trades about 0.05 of its potential returns per unit of risk. APEX International Financial is currently generating about -0.03 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

ESUN Financial Holding  vs.  APEX International Financial

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.

APEX International

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in APEX International Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, APEX International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ESUN Financial and APEX International

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

The idea behind ESUN Financial Holding and APEX International Financial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.