Correlation Between Esotiq Henderson and Magna Polonia

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

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

Diversification Opportunities for Esotiq Henderson and Magna Polonia

0.69

Correlation Coefficient

Esotiq Henderson  Magna Polonia

Poor diversification

The 3 months correlation between Esotiq and Magna is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Esotiq Henderson SA and Magna Polonia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Polonia SA and Esotiq Henderson 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 Esotiq Henderson SA are associated (or correlated) with Magna Polonia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Polonia SA has no effect on the direction of Esotiq Henderson i.e., Esotiq Henderson and Magna Polonia go up and down completely randomly.

Pair Corralation between Esotiq Henderson and Magna Polonia

Assuming the 90 days trading horizon Esotiq Henderson SA is expected to under-perform the Magna Polonia. In addition to that, Esotiq Henderson is 1.79 times more volatile than Magna Polonia SA. It trades about -0.11 of its total potential returns per unit of risk. Magna Polonia SA is currently generating about -0.09 per unit of volatility. If you would invest  299.00  in Magna Polonia SA on October 7, 2024 and sell it today you would lose (27.00) from holding Magna Polonia SA or give up 9.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Esotiq Henderson SA  vs.  Magna Polonia SA

Esotiq Henderson

Risk-Adjusted Performance

0 of 100

Very Weak

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

Magna Polonia SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magna Polonia SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Esotiq Henderson and Magna Polonia

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

The idea behind Esotiq Henderson SA and Magna Polonia 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.