Correlation Between ESH Acquisition and Stifel Financial

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

Diversification Opportunities for ESH Acquisition and Stifel Financial

-0.03

Correlation Coefficient

ESH Acquisition  Stifel Financial

Good diversification

The 3 months correlation between ESH and Stifel is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ESH Acquisition Corp and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial 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 Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of ESH Acquisition i.e., ESH Acquisition and Stifel Financial go up and down completely randomly.

Pair Corralation between ESH Acquisition and Stifel Financial

Given the investment horizon of 90 days ESH Acquisition Corp is expected to generate 0.5 times more return on investment than Stifel Financial. However, ESH Acquisition Corp is 2.0 times less risky than Stifel Financial. It trades about -0.07 of its potential returns per unit of risk. Stifel Financial is currently generating about -0.06 per unit of risk. If you would invest  1,125  in ESH Acquisition Corp on December 26, 2024 and sell it today you would lose (49.00) from holding ESH Acquisition Corp or give up 4.36% of portfolio value over 90 days.

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

ESH Acquisition Corp  vs.  Stifel Financial

ESH Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESH Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stifel Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stifel Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ESH Acquisition and Stifel Financial

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

The idea behind ESH Acquisition Corp and Stifel Financial 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.