Correlation Between ESE Entertainment and Converge Technology

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

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

Diversification Opportunities for ESE Entertainment and Converge Technology

0.52

Correlation Coefficient

ESE Entertainment  Converge Technology

Very weak diversification

The 3 months correlation between ESE and Converge is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ESE Entertainment and Converge Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Technology 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 Converge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Technology has no effect on the direction of ESE Entertainment i.e., ESE Entertainment and Converge Technology go up and down completely randomly.

Pair Corralation between ESE Entertainment and Converge Technology

Assuming the 90 days horizon ESE Entertainment is expected to generate 1.71 times more return on investment than Converge Technology. However, ESE Entertainment is 1.71 times more volatile than Converge Technology Solutions. It trades about -0.01 of its potential returns per unit of risk. Converge Technology Solutions is currently generating about -0.08 per unit of risk. If you would invest  8.00  in ESE Entertainment on September 2, 2024 and sell it today you would lose (1.50) from holding ESE Entertainment or give up 18.75% of portfolio value over 90 days.

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

ESE Entertainment  vs.  Converge Technology Solutions

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 fairly stable basic indicators, ESE Entertainment is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Converge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ESE Entertainment and Converge Technology

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

The idea behind ESE Entertainment and Converge Technology Solutions 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.