Correlation Between Valens and ESH Acquisition

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

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

Diversification Opportunities for Valens and ESH Acquisition

-0.25

Correlation Coefficient

Valens  ESH Acquisition

Very good diversification

The 3 months correlation between Valens and ESH is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Valens 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 Valens 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 Valens 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 Valens i.e., Valens and ESH Acquisition go up and down completely randomly.

Pair Corralation between Valens and ESH Acquisition

Considering the 90-day investment horizon Valens is expected to under-perform the ESH Acquisition. In addition to that, Valens is 18.3 times more volatile than ESH Acquisition Corp. It trades about -0.04 of its total potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.17 per unit of volatility. If you would invest  1,068  in ESH Acquisition Corp on September 21, 2024 and sell it today you would earn a total of  13.00  from holding ESH Acquisition Corp or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Valens  vs.  ESH Acquisition Corp

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ESH Acquisition Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valens and ESH Acquisition

The main advantage of trading using opposite Valens and ESH Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valens 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 Valens 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.