Correlation Between Dear Cashmere and Esker SA

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

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

Diversification Opportunities for Dear Cashmere and Esker SA

0.18

Correlation Coefficient

Dear Cashmere  Esker SA

Average diversification

The 3 months correlation between Dear and Esker is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dear Cashmere Holding and Esker SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esker SA and Dear Cashmere 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 Dear Cashmere Holding 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 Dear Cashmere i.e., Dear Cashmere and Esker SA go up and down completely randomly.

Pair Corralation between Dear Cashmere and Esker SA

Given the investment horizon of 90 days Dear Cashmere Holding is expected to generate 8.28 times more return on investment than Esker SA. However, Dear Cashmere is 8.28 times more volatile than Esker SA. It trades about 0.1 of its potential returns per unit of risk. Esker SA is currently generating about 0.15 per unit of risk. If you would invest  14.00  in Dear Cashmere Holding on September 13, 2024 and sell it today you would earn a total of  3.00  from holding Dear Cashmere Holding or generate 21.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Dear Cashmere Holding  vs.  Esker SA

Dear Cashmere Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dear Cashmere Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Dear Cashmere reported solid returns over the last few months and may actually be approaching a breakup point.

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 Dear Cashmere and Esker SA

The main advantage of trading using opposite Dear Cashmere and Esker SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dear Cashmere 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 Dear Cashmere Holding 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.