Correlation Between Newretail and ESUN Financial

Can any of the company-specific risk be diversified away by investing in both Newretail and ESUN Financial 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 Newretail and ESUN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Newretail Co and ESUN Financial Holding, you can compare the effects of market volatilities on Newretail and ESUN Financial 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 Newretail with a short position of ESUN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newretail and ESUN Financial.

Diversification Opportunities for Newretail and ESUN Financial

-0.23

Correlation Coefficient

Newretail  ESUN Financial

Very good diversification

The 3 months correlation between Newretail and ESUN is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and ESUN Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESUN Financial Holding and Newretail 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 Newretail Co are associated (or correlated) with ESUN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESUN Financial Holding has no effect on the direction of Newretail i.e., Newretail and ESUN Financial go up and down completely randomly.

Pair Corralation between Newretail and ESUN Financial

Assuming the 90 days trading horizon Newretail Co is expected to generate 4.24 times more return on investment than ESUN Financial. However, Newretail is 4.24 times more volatile than ESUN Financial Holding. It trades about 0.22 of its potential returns per unit of risk. ESUN Financial Holding is currently generating about -0.02 per unit of risk. If you would invest  1,470  in Newretail Co on September 16, 2024 and sell it today you would earn a total of  1,020  from holding Newretail Co or generate 69.39% return on investment over 90 days.

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

Newretail Co  vs.  ESUN Financial Holding

Newretail

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Newretail and ESUN Financial

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

The idea behind Newretail Co and ESUN Financial Holding 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..