Correlation Between ESE Entertainment and Amazon CDR

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

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

Diversification Opportunities for ESE Entertainment and Amazon CDR

-0.86

Correlation Coefficient

ESE Entertainment  Amazon CDR

Pay attention - limited upside

The 3 months correlation between ESE and Amazon is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding ESE Entertainment and Amazon CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon CDR and ESE Entertainment 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 ESE Entertainment are associated (or correlated) with Amazon CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon CDR has no effect on the direction of ESE Entertainment i.e., ESE Entertainment and Amazon CDR go up and down completely randomly.

Pair Corralation between ESE Entertainment and Amazon CDR

Assuming the 90 days horizon ESE Entertainment is expected to under-perform the Amazon CDR. In addition to that, ESE Entertainment is 2.64 times more volatile than Amazon CDR. It trades about -0.14 of its total potential returns per unit of risk. Amazon CDR is currently generating about 0.27 per unit of volatility. If you would invest  2,478  in Amazon CDR on September 27, 2024 and sell it today you would earn a total of  245.00  from holding Amazon CDR or generate 9.89% return on investment over 90 days.

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

ESE Entertainment  vs.  Amazon CDR

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Amazon CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESE Entertainment and Amazon CDR

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

The idea behind ESE Entertainment and Amazon CDR 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.