Correlation Between Entertainment Network and Axita Cotton

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

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

Diversification Opportunities for Entertainment Network and Axita Cotton

0.88

Correlation Coefficient

Entertainment Network  Axita Cotton

Very poor diversification

The 3 months correlation between Entertainment and Axita is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Entertainment Network Limited and Axita Cotton Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axita Cotton Limited and Entertainment Network 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 Entertainment Network Limited are associated (or correlated) with Axita Cotton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axita Cotton Limited has no effect on the direction of Entertainment Network i.e., Entertainment Network and Axita Cotton go up and down completely randomly.

Pair Corralation between Entertainment Network and Axita Cotton

Assuming the 90 days trading horizon Entertainment Network Limited is expected to under-perform the Axita Cotton. In addition to that, Entertainment Network is 1.66 times more volatile than Axita Cotton Limited. It trades about -0.2 of its total potential returns per unit of risk. Axita Cotton Limited is currently generating about -0.1 per unit of volatility. If you would invest  1,117  in Axita Cotton Limited on December 26, 2024 and sell it today you would lose (115.00) from holding Axita Cotton Limited or give up 10.3% of portfolio value over 90 days.

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

Entertainment Network Limited  vs.  Axita Cotton Limited

Entertainment Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entertainment Network Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Axita Cotton Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axita Cotton Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Entertainment Network and Axita Cotton

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

The idea behind Entertainment Network Limited and Axita Cotton Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.