Correlation Between ESE Entertainment and Carebook Technologies

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

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

Diversification Opportunities for ESE Entertainment and Carebook Technologies

0.59

Correlation Coefficient

ESE Entertainment  Carebook Technologies

Very weak diversification

The 3 months correlation between ESE and Carebook is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ESE Entertainment and Carebook Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carebook Technologies 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 Carebook Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carebook Technologies has no effect on the direction of ESE Entertainment i.e., ESE Entertainment and Carebook Technologies go up and down completely randomly.

Pair Corralation between ESE Entertainment and Carebook Technologies

Assuming the 90 days horizon ESE Entertainment is expected to generate 10.95 times less return on investment than Carebook Technologies. But when comparing it to its historical volatility, ESE Entertainment is 7.96 times less risky than Carebook Technologies. It trades about 0.14 of its potential returns per unit of risk. Carebook Technologies is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5.50  in Carebook Technologies on October 10, 2024 and sell it today you would earn a total of  4.00  from holding Carebook Technologies or generate 72.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

ESE Entertainment  vs.  Carebook Technologies

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

Carebook Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carebook Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Carebook Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESE Entertainment and Carebook Technologies

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

The idea behind ESE Entertainment and Carebook Technologies 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.