Correlation Between ESUN Financial and Grand Ocean

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

Diversification Opportunities for ESUN Financial and Grand Ocean

-0.17

Correlation Coefficient

ESUN Financial  Grand Ocean

Good diversification

The 3 months correlation between ESUN and Grand is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Grand Ocean Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Ocean Retail 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 Grand Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Ocean Retail has no effect on the direction of ESUN Financial i.e., ESUN Financial and Grand Ocean go up and down completely randomly.

Pair Corralation between ESUN Financial and Grand Ocean

Assuming the 90 days trading horizon ESUN Financial is expected to generate 3.1 times less return on investment than Grand Ocean. But when comparing it to its historical volatility, ESUN Financial Holding is 4.59 times less risky than Grand Ocean. It trades about 0.11 of its potential returns per unit of risk. Grand Ocean Retail is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,185  in Grand Ocean Retail on September 16, 2024 and sell it today you would earn a total of  55.00  from holding Grand Ocean Retail or generate 4.64% 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.  Grand Ocean Retail

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.

Grand Ocean Retail

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Ocean Retail are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Grand Ocean showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESUN Financial and Grand Ocean

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

The idea behind ESUN Financial Holding and Grand Ocean Retail 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.