Correlation Between Better World and ESAC Old

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

By analyzing existing cross correlation between Better World Acquisition and ESAC Old, you can compare the effects of market volatilities on Better World and ESAC Old 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 Better World with a short position of ESAC Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better World and ESAC Old.

Diversification Opportunities for Better World and ESAC Old

0.0

Correlation Coefficient

Better World  ESAC Old

Pay attention - limited upside

The 3 months correlation between Better and ESAC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Better World Acquisition and ESAC Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAC Old and Better World 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 Better World Acquisition are associated (or correlated) with ESAC Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESAC Old has no effect on the direction of Better World i.e., Better World and ESAC Old go up and down completely randomly.

Pair Corralation between Better World and ESAC Old

If you would invest (100.00) in ESAC Old on December 5, 2024 and sell it today you would earn a total of  100.00  from holding ESAC Old or generate -100.0% return on investment over 90 days.

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

Better World Acquisition  vs.  ESAC Old

Better World Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Better World Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Better World is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ESAC Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESAC Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ESAC Old is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Better World and ESAC Old

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

The idea behind Better World Acquisition and ESAC Old 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.