Correlation Between Tradetool Auto and ESUN Financial

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

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

Diversification Opportunities for Tradetool Auto and ESUN Financial

-0.26

Correlation Coefficient

Tradetool Auto  ESUN Financial

Very good diversification

The 3 months correlation between Tradetool and ESUN is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Tradetool Auto 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 Tradetool Auto 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 Tradetool Auto 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 Tradetool Auto i.e., Tradetool Auto and ESUN Financial go up and down completely randomly.

Pair Corralation between Tradetool Auto and ESUN Financial

Assuming the 90 days trading horizon Tradetool Auto Co is expected to under-perform the ESUN Financial. In addition to that, Tradetool Auto is 3.31 times more volatile than ESUN Financial Holding. It trades about -0.06 of its total potential returns per unit of risk. ESUN Financial Holding is currently generating about 0.11 per unit of volatility. If you would invest  2,750  in ESUN Financial Holding on December 10, 2024 and sell it today you would earn a total of  145.00  from holding ESUN Financial Holding or generate 5.27% return on investment over 90 days.

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

Tradetool Auto Co  vs.  ESUN Financial Holding

Tradetool Auto

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tradetool Auto Co 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.

ESUN Financial Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESUN Financial Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. 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 Tradetool Auto and ESUN Financial

The main advantage of trading using opposite Tradetool Auto and ESUN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tradetool Auto 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 Tradetool Auto 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.