Correlation Between Royal Helium and ESE Entertainment

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

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

Diversification Opportunities for Royal Helium and ESE Entertainment

0.71

Correlation Coefficient

Royal Helium  ESE Entertainment

Poor diversification

The 3 months correlation between Royal and ESE is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Royal Helium and ESE Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESE Entertainment and Royal Helium 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 Royal Helium are associated (or correlated) with ESE Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESE Entertainment has no effect on the direction of Royal Helium i.e., Royal Helium and ESE Entertainment go up and down completely randomly.

Pair Corralation between Royal Helium and ESE Entertainment

Assuming the 90 days horizon Royal Helium is expected to generate 9.06 times more return on investment than ESE Entertainment. However, Royal Helium is 9.06 times more volatile than ESE Entertainment. It trades about 0.07 of its potential returns per unit of risk. ESE Entertainment is currently generating about 0.0 per unit of risk. If you would invest  37.00  in Royal Helium on December 1, 2024 and sell it today you would lose (35.00) from holding Royal Helium or give up 94.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Royal Helium  vs.  ESE Entertainment

Royal Helium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Helium are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royal Helium showed solid returns over the last few months and may actually be approaching a breakup point.

ESE Entertainment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESE Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ESE Entertainment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Helium and ESE Entertainment

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

The idea behind Royal Helium and ESE Entertainment 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.