Correlation Between ESGL Holdings and SIGNA Sports

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

Diversification Opportunities for ESGL Holdings and SIGNA Sports

-0.56

Correlation Coefficient

ESGL Holdings  SIGNA Sports

Excellent diversification

The 3 months correlation between ESGL and SIGNA is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and SIGNA Sports United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIGNA Sports United 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 SIGNA Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIGNA Sports United has no effect on the direction of ESGL Holdings i.e., ESGL Holdings and SIGNA Sports go up and down completely randomly.

Pair Corralation between ESGL Holdings and SIGNA Sports

If you would invest  1.34  in ESGL Holdings Limited on September 29, 2024 and sell it today you would earn a total of  0.06  from holding ESGL Holdings Limited or generate 4.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.25%
Values	Daily Returns

ESGL Holdings Limited  vs.  SIGNA Sports United

ESGL Holdings Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

SIGNA Sports United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIGNA Sports United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIGNA Sports is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ESGL Holdings and SIGNA Sports

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

The idea behind ESGL Holdings Limited and SIGNA Sports United 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.