Correlation Between Esoterica NextG and SPDR SP

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

By analyzing existing cross correlation between Esoterica NextG Economy and SPDR SP Retail, you can compare the effects of market volatilities on Esoterica NextG and SPDR SP 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 Esoterica NextG with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esoterica NextG and SPDR SP.

Diversification Opportunities for Esoterica NextG and SPDR SP

0.67

Correlation Coefficient

Esoterica NextG  SPDR SP

Poor diversification

The 3 months correlation between Esoterica and SPDR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Esoterica NextG Economy and SPDR SP Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Retail and Esoterica NextG 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 Esoterica NextG Economy are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Retail has no effect on the direction of Esoterica NextG i.e., Esoterica NextG and SPDR SP go up and down completely randomly.

Pair Corralation between Esoterica NextG and SPDR SP

Given the investment horizon of 90 days Esoterica NextG Economy is expected to generate 1.62 times more return on investment than SPDR SP. However, Esoterica NextG is 1.62 times more volatile than SPDR SP Retail. It trades about 0.04 of its potential returns per unit of risk. SPDR SP Retail is currently generating about -0.15 per unit of risk. If you would invest  7,421  in Esoterica NextG Economy on October 22, 2024 and sell it today you would earn a total of  50.00  from holding Esoterica NextG Economy or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Esoterica NextG Economy  vs.  SPDR SP Retail

Esoterica NextG Economy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Esoterica NextG Economy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Esoterica NextG is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

SPDR SP Retail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Retail are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Esoterica NextG and SPDR SP

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

The idea behind Esoterica NextG Economy and SPDR SP Retail 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.