Correlation Between Hudson Pacific and ESH Acquisition

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

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

Diversification Opportunities for Hudson Pacific and ESH Acquisition

0.23

Correlation Coefficient

Hudson Pacific  ESH Acquisition

Modest diversification

The 3 months correlation between Hudson and ESH is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition Corp and Hudson Pacific 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 Hudson Pacific Properties are associated (or correlated) with ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of Hudson Pacific i.e., Hudson Pacific and ESH Acquisition go up and down completely randomly.

Pair Corralation between Hudson Pacific and ESH Acquisition

Considering the 90-day investment horizon Hudson Pacific is expected to generate 2.59 times less return on investment than ESH Acquisition. But when comparing it to its historical volatility, Hudson Pacific Properties is 2.45 times less risky than ESH Acquisition. It trades about 0.1 of its potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8.50  in ESH Acquisition Corp on December 2, 2024 and sell it today you would earn a total of  1.50  from holding ESH Acquisition Corp or generate 17.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.0%
Values	Daily Returns

Hudson Pacific Properties  vs.  ESH Acquisition Corp

Hudson Pacific Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hudson Pacific Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

ESH Acquisition Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ESH Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hudson Pacific and ESH Acquisition

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

The idea behind Hudson Pacific Properties and ESH Acquisition Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.