Correlation Between DUET Acquisition and ESH Acquisition

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

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

Diversification Opportunities for DUET Acquisition and ESH Acquisition

-0.63

Correlation Coefficient

DUET Acquisition  ESH Acquisition

Excellent diversification

The 3 months correlation between DUET and ESH is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding DUET Acquisition Corp and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition Corp and DUET Acquisition 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 DUET Acquisition Corp are associated (or correlated) with ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of DUET Acquisition i.e., DUET Acquisition and ESH Acquisition go up and down completely randomly.

Pair Corralation between DUET Acquisition and ESH Acquisition

Given the investment horizon of 90 days DUET Acquisition Corp is expected to generate 0.01 times more return on investment than ESH Acquisition. However, DUET Acquisition Corp is 112.67 times less risky than ESH Acquisition. It trades about 0.07 of its potential returns per unit of risk. ESH Acquisition Corp is currently generating about -0.03 per unit of risk. If you would invest  1,126  in DUET Acquisition Corp on September 3, 2024 and sell it today you would earn a total of  7.00  from holding DUET Acquisition Corp or generate 0.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	53.97%
Values	Daily Returns

DUET Acquisition Corp  vs.  ESH Acquisition Corp

DUET Acquisition Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DUET Acquisition Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, DUET Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ESH Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESH Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with DUET Acquisition and ESH Acquisition

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

The idea behind DUET Acquisition Corp and ESH Acquisition Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.