Correlation Between ESUN Financial and Planet Technology

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

Diversification Opportunities for ESUN Financial and Planet Technology

0.73

Correlation Coefficient

ESUN Financial  Planet Technology

Poor diversification

The 3 months correlation between ESUN and Planet is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Planet Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Technology 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 Planet Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Technology has no effect on the direction of ESUN Financial i.e., ESUN Financial and Planet Technology go up and down completely randomly.

Pair Corralation between ESUN Financial and Planet Technology

Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 0.62 times more return on investment than Planet Technology. However, ESUN Financial Holding is 1.61 times less risky than Planet Technology. It trades about -0.02 of its potential returns per unit of risk. Planet Technology is currently generating about -0.13 per unit of risk. If you would invest  2,770  in ESUN Financial Holding on September 15, 2024 and sell it today you would lose (35.00) from holding ESUN Financial Holding or give up 1.26% of portfolio value over 90 days.

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

ESUN Financial Holding  vs.  Planet Technology

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.

Planet Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Planet Technology 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 Planet Technology

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

The idea behind ESUN Financial Holding and Planet Technology 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 Anywhere module to track or share privately all of your investments from the convenience of any device.