Correlation Between Direct Equity and Esker SA

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

By analyzing existing cross correlation between Direct Equity International and Esker SA, you can compare the effects of market volatilities on Direct Equity and Esker SA 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 Direct Equity with a short position of Esker SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Equity and Esker SA.

Diversification Opportunities for Direct Equity and Esker SA

-0.52

Correlation Coefficient

Direct Equity  Esker SA

Excellent diversification

The 3 months correlation between Direct and Esker is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Direct Equity International and Esker SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esker SA and Direct Equity 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 Direct Equity International are associated (or correlated) with Esker SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esker SA has no effect on the direction of Direct Equity i.e., Direct Equity and Esker SA go up and down completely randomly.

Pair Corralation between Direct Equity and Esker SA

Given the investment horizon of 90 days Direct Equity International is expected to under-perform the Esker SA. In addition to that, Direct Equity is 6.78 times more volatile than Esker SA. It trades about -0.13 of its total potential returns per unit of risk. Esker SA is currently generating about 0.15 per unit of volatility. If you would invest  25,500  in Esker SA on September 5, 2024 and sell it today you would earn a total of  4,392  from holding Esker SA or generate 17.22% return on investment over 90 days.

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

Direct Equity International  vs.  Esker SA

Direct Equity Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direct Equity International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Esker SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Esker SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Esker SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Equity and Esker SA

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

The idea behind Direct Equity International and Esker SA 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.