Correlation Between ESGL Holdings and Enviri

Can any of the company-specific risk be diversified away by investing in both ESGL Holdings and Enviri 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 Enviri 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 Enviri, you can compare the effects of market volatilities on ESGL Holdings and Enviri 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 Enviri. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESGL Holdings and Enviri.

Diversification Opportunities for ESGL Holdings and Enviri

-0.73

Correlation Coefficient

ESGL Holdings  Enviri

Pay attention - limited upside

The 3 months correlation between ESGL and Enviri is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and Enviri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enviri 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 Enviri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enviri has no effect on the direction of ESGL Holdings i.e., ESGL Holdings and Enviri go up and down completely randomly.

Pair Corralation between ESGL Holdings and Enviri

Assuming the 90 days horizon ESGL Holdings Limited is expected to generate 3.76 times more return on investment than Enviri. However, ESGL Holdings is 3.76 times more volatile than Enviri. It trades about 0.16 of its potential returns per unit of risk. Enviri is currently generating about -0.12 per unit of risk. If you would invest  1.00  in ESGL Holdings Limited on September 4, 2024 and sell it today you would earn a total of  0.80  from holding ESGL Holdings Limited or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	70.31%
Values	Daily Returns

ESGL Holdings Limited  vs.  Enviri

ESGL Holdings Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Enviri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enviri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with ESGL Holdings and Enviri

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

The idea behind ESGL Holdings Limited and Enviri 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.