Correlation Between ESH Acquisition and Gabelli MultiMedia

Can any of the company-specific risk be diversified away by investing in both ESH Acquisition and Gabelli MultiMedia 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 ESH Acquisition and Gabelli MultiMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESH Acquisition Corp and Gabelli MultiMedia Mutual, you can compare the effects of market volatilities on ESH Acquisition and Gabelli MultiMedia 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 ESH Acquisition with a short position of Gabelli MultiMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESH Acquisition and Gabelli MultiMedia.

Diversification Opportunities for ESH Acquisition and Gabelli MultiMedia

-0.13

Correlation Coefficient

ESH Acquisition  Gabelli MultiMedia

Good diversification

The 3 months correlation between ESH and Gabelli is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding ESH Acquisition Corp and Gabelli MultiMedia Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli MultiMedia Mutual and ESH Acquisition 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 ESH Acquisition Corp are associated (or correlated) with Gabelli MultiMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli MultiMedia Mutual has no effect on the direction of ESH Acquisition i.e., ESH Acquisition and Gabelli MultiMedia go up and down completely randomly.

Pair Corralation between ESH Acquisition and Gabelli MultiMedia

Given the investment horizon of 90 days ESH Acquisition Corp is expected to generate 1.62 times more return on investment than Gabelli MultiMedia. However, ESH Acquisition is 1.62 times more volatile than Gabelli MultiMedia Mutual. It trades about 0.04 of its potential returns per unit of risk. Gabelli MultiMedia Mutual is currently generating about 0.02 per unit of risk. If you would invest  1,068  in ESH Acquisition Corp on November 29, 2024 and sell it today you would earn a total of  31.00  from holding ESH Acquisition Corp or generate 2.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

ESH Acquisition Corp  vs.  Gabelli MultiMedia Mutual

ESH Acquisition Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Gabelli MultiMedia Mutual

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli MultiMedia Mutual are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Gabelli MultiMedia 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 ESH Acquisition and Gabelli MultiMedia

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

The idea behind ESH Acquisition Corp and Gabelli MultiMedia Mutual 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.