Correlation Between ESUN Financial and Tait Marketing

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

Diversification Opportunities for ESUN Financial and Tait Marketing

0.02

Correlation Coefficient

ESUN Financial  Tait Marketing

Significant diversification

The 3 months correlation between ESUN and Tait is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Tait Marketing Distribution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tait Marketing Distr 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 Tait Marketing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tait Marketing Distr has no effect on the direction of ESUN Financial i.e., ESUN Financial and Tait Marketing go up and down completely randomly.

Pair Corralation between ESUN Financial and Tait Marketing

Assuming the 90 days trading horizon ESUN Financial is expected to generate 1.79 times less return on investment than Tait Marketing. But when comparing it to its historical volatility, ESUN Financial Holding is 1.41 times less risky than Tait Marketing. It trades about 0.03 of its potential returns per unit of risk. Tait Marketing Distribution is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,111  in Tait Marketing Distribution on September 19, 2024 and sell it today you would earn a total of  874.00  from holding Tait Marketing Distribution or generate 28.09% 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.  Tait Marketing Distribution

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.

Tait Marketing Distr

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind ESUN Financial Holding and Tait Marketing Distribution 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.