Correlation Between ESUN Financial and CKM Building

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

Diversification Opportunities for ESUN Financial and CKM Building

0.71

Correlation Coefficient

ESUN Financial  CKM Building

Poor diversification

The 3 months correlation between ESUN and CKM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and CKM Building Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKM Building Material 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 CKM Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKM Building Material has no effect on the direction of ESUN Financial i.e., ESUN Financial and CKM Building go up and down completely randomly.

Pair Corralation between ESUN Financial and CKM Building

Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 1.56 times more return on investment than CKM Building. However, ESUN Financial is 1.56 times more volatile than CKM Building Material. It trades about 0.25 of its potential returns per unit of risk. CKM Building Material is currently generating about 0.05 per unit of risk. If you would invest  2,800  in ESUN Financial Holding on December 4, 2024 and sell it today you would earn a total of  145.00  from holding ESUN Financial Holding or generate 5.18% return on investment over 90 days.

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

ESUN Financial Holding  vs.  CKM Building Material

ESUN Financial Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESUN Financial Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ESUN Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CKM Building Material

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CKM Building Material are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CKM Building may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ESUN Financial and CKM Building

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

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