Correlation Between YHN Acquisition and ESH Acquisition

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

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

Diversification Opportunities for YHN Acquisition and ESH Acquisition

0.06

Correlation Coefficient

YHN Acquisition  ESH Acquisition

Significant diversification

The 3 months correlation between YHN and ESH is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding YHN Acquisition I 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 YHN Acquisition 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 YHN Acquisition I 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 YHN Acquisition i.e., YHN Acquisition and ESH Acquisition go up and down completely randomly.

Pair Corralation between YHN Acquisition and ESH Acquisition

Assuming the 90 days horizon YHN Acquisition I is expected to generate 1.47 times more return on investment than ESH Acquisition. However, YHN Acquisition is 1.47 times more volatile than ESH Acquisition Corp. It trades about 0.09 of its potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.04 per unit of risk. If you would invest  13.00  in YHN Acquisition I on December 27, 2024 and sell it today you would earn a total of  1.00  from holding YHN Acquisition I or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

YHN Acquisition I  vs.  ESH Acquisition Corp

YHN Acquisition I

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in YHN Acquisition I are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, YHN Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

ESH Acquisition Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, ESH Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YHN Acquisition and ESH Acquisition

The main advantage of trading using opposite YHN Acquisition and ESH Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YHN Acquisition 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 YHN Acquisition I 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.