Correlation Between ESGL Holdings and Montrose Environmental

Can any of the company-specific risk be diversified away by investing in both ESGL Holdings and Montrose Environmental 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 ESGL Holdings and Montrose Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESGL Holdings Limited and Montrose Environmental Grp, you can compare the effects of market volatilities on ESGL Holdings and Montrose Environmental 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 ESGL Holdings with a short position of Montrose Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESGL Holdings and Montrose Environmental.

Diversification Opportunities for ESGL Holdings and Montrose Environmental

-0.23

Correlation Coefficient

ESGL Holdings  Montrose Environmental

Very good diversification

The 3 months correlation between ESGL and Montrose is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and Montrose Environmental Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montrose Environmental and ESGL Holdings 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 ESGL Holdings Limited are associated (or correlated) with Montrose Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montrose Environmental has no effect on the direction of ESGL Holdings i.e., ESGL Holdings and Montrose Environmental go up and down completely randomly.

Pair Corralation between ESGL Holdings and Montrose Environmental

Assuming the 90 days horizon ESGL Holdings Limited is expected to generate 2.53 times more return on investment than Montrose Environmental. However, ESGL Holdings is 2.53 times more volatile than Montrose Environmental Grp. It trades about 0.02 of its potential returns per unit of risk. Montrose Environmental Grp is currently generating about -0.01 per unit of risk. If you would invest  1.78  in ESGL Holdings Limited on December 26, 2024 and sell it today you would lose (0.55) from holding ESGL Holdings Limited or give up 30.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.33%
Values	Daily Returns

ESGL Holdings Limited  vs.  Montrose Environmental Grp

ESGL Holdings Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Montrose Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montrose Environmental Grp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Montrose Environmental is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ESGL Holdings and Montrose Environmental

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

The idea behind ESGL Holdings Limited and Montrose Environmental Grp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.