Correlation Between Western Midstream and ESGL Holdings

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

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

Diversification Opportunities for Western Midstream and ESGL Holdings

0.2

Correlation Coefficient

Western Midstream  ESGL Holdings

Modest diversification

The 3 months correlation between Western and ESGL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners 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 Western Midstream 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 Western Midstream Partners 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 Western Midstream i.e., Western Midstream and ESGL Holdings go up and down completely randomly.

Pair Corralation between Western Midstream and ESGL Holdings

Considering the 90-day investment horizon Western Midstream Partners is expected to under-perform the ESGL Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Western Midstream Partners is 11.48 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 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.34  in ESGL Holdings Limited on October 4, 2024 and sell it today you would earn a total of  0.00  from holding ESGL Holdings Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.29%
Values	Daily Returns

Western Midstream Partners  vs.  ESGL Holdings Limited

Western Midstream

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Midstream Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Western Midstream is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ESGL Holdings Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 5 (%) 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 Western Midstream and ESGL Holdings

The main advantage of trading using opposite Western Midstream and ESGL Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Midstream 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 Western Midstream Partners 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.