Correlation Between ESH Acquisition and Distoken Acquisition

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

Diversification Opportunities for ESH Acquisition and Distoken Acquisition

-0.08

Correlation Coefficient

ESH Acquisition  Distoken Acquisition

Good diversification

The 3 months correlation between ESH and Distoken is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding ESH Acquisition Corp and Distoken Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distoken Acquisition 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 Distoken Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distoken Acquisition has no effect on the direction of ESH Acquisition i.e., ESH Acquisition and Distoken Acquisition go up and down completely randomly.

Pair Corralation between ESH Acquisition and Distoken Acquisition

Assuming the 90 days horizon ESH Acquisition Corp is expected to generate 9.7 times more return on investment than Distoken Acquisition. However, ESH Acquisition is 9.7 times more volatile than Distoken Acquisition. It trades about 0.04 of its potential returns per unit of risk. Distoken Acquisition is currently generating about -0.01 per unit of risk. If you would invest  9.00  in ESH Acquisition Corp on December 28, 2024 and sell it today you would lose (0.50) from holding ESH Acquisition Corp or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.33%
Values	Daily Returns

ESH Acquisition Corp  vs.  Distoken Acquisition

ESH Acquisition Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, ESH Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Distoken Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distoken Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Distoken Acquisition 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 Distoken Acquisition

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

The idea behind ESH Acquisition Corp and Distoken Acquisition 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.