Correlation Between Enviri and ESGL Holdings

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

By analyzing existing cross correlation between Enviri and ESGL Holdings Limited, you can compare the effects of market volatilities on Enviri and ESGL Holdings 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 Enviri with a short position of ESGL Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enviri and ESGL Holdings.

Diversification Opportunities for Enviri and ESGL Holdings

-0.04

Correlation Coefficient

Enviri  ESGL Holdings

Good diversification

The 3 months correlation between Enviri and ESGL is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Enviri and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited and Enviri 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 Enviri are associated (or correlated) with ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of Enviri i.e., Enviri and ESGL Holdings go up and down completely randomly.

Pair Corralation between Enviri and ESGL Holdings

Given the investment horizon of 90 days Enviri is expected to under-perform the ESGL Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Enviri is 4.31 times less risky than ESGL Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The ESGL Holdings Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.34  in ESGL Holdings Limited on December 28, 2024 and sell it today you would lose (0.21) from holding ESGL Holdings Limited or give up 15.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.33%
Values	Daily Returns

Enviri  vs.  ESGL Holdings Limited

Enviri

Risk-Adjusted Performance

Very Weak

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

ESGL Holdings Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enviri and ESGL Holdings

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

The idea behind Enviri and ESGL Holdings Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.