Correlation Between ESS Tech and CBAK Energy

Can any of the company-specific risk be diversified away by investing in both ESS Tech and CBAK Energy 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 ESS Tech and CBAK Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESS Tech and CBAK Energy Technology, you can compare the effects of market volatilities on ESS Tech and CBAK Energy 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 ESS Tech with a short position of CBAK Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESS Tech and CBAK Energy.

Diversification Opportunities for ESS Tech and CBAK Energy

0.58

Correlation Coefficient

ESS Tech  CBAK Energy

Very weak diversification

The 3 months correlation between ESS and CBAK is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ESS Tech and CBAK Energy Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBAK Energy Technology and ESS Tech 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 ESS Tech are associated (or correlated) with CBAK Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBAK Energy Technology has no effect on the direction of ESS Tech i.e., ESS Tech and CBAK Energy go up and down completely randomly.

Pair Corralation between ESS Tech and CBAK Energy

Considering the 90-day investment horizon ESS Tech is expected to under-perform the CBAK Energy. In addition to that, ESS Tech is 1.27 times more volatile than CBAK Energy Technology. It trades about -0.05 of its total potential returns per unit of risk. CBAK Energy Technology is currently generating about 0.03 per unit of volatility. If you would invest  79.00  in CBAK Energy Technology on September 17, 2024 and sell it today you would earn a total of  5.00  from holding CBAK Energy Technology or generate 6.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.66%
Values	Daily Returns

ESS Tech  vs.  CBAK Energy Technology

ESS Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESS Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ESS Tech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

CBAK Energy Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ESS Tech and CBAK Energy

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

The idea behind ESS Tech and CBAK Energy Technology 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.