Correlation Between Dye Durham and ESE Entertainment

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

By analyzing existing cross correlation between Dye Durham and ESE Entertainment, you can compare the effects of market volatilities on Dye Durham and ESE Entertainment 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 Dye Durham with a short position of ESE Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dye Durham and ESE Entertainment.

Diversification Opportunities for Dye Durham and ESE Entertainment

-0.43

Correlation Coefficient

Dye Durham  ESE Entertainment

Very good diversification

The 3 months correlation between Dye and ESE is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dye Durham and ESE Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESE Entertainment and Dye Durham 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 Dye Durham are associated (or correlated) with ESE Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESE Entertainment has no effect on the direction of Dye Durham i.e., Dye Durham and ESE Entertainment go up and down completely randomly.

Pair Corralation between Dye Durham and ESE Entertainment

Assuming the 90 days trading horizon Dye Durham is expected to generate 0.83 times more return on investment than ESE Entertainment. However, Dye Durham is 1.21 times less risky than ESE Entertainment. It trades about 0.08 of its potential returns per unit of risk. ESE Entertainment is currently generating about -0.19 per unit of risk. If you would invest  1,951  in Dye Durham on September 2, 2024 and sell it today you would earn a total of  134.00  from holding Dye Durham or generate 6.87% return on investment over 90 days.

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

Dye Durham  vs.  ESE Entertainment

Dye Durham

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dye Durham are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Dye Durham displayed solid returns over the last few months and may actually be approaching a breakup point.

ESE Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESE Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ESE Entertainment is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dye Durham and ESE Entertainment

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

The idea behind Dye Durham and ESE Entertainment 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.