Correlation Between ES Ceramics and Aeon Credit

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

By analyzing existing cross correlation between ES Ceramics Technology and Aeon Credit Service, you can compare the effects of market volatilities on ES Ceramics and Aeon Credit 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 ES Ceramics with a short position of Aeon Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of ES Ceramics and Aeon Credit.

Diversification Opportunities for ES Ceramics and Aeon Credit

0.4

Correlation Coefficient

ES Ceramics  Aeon Credit

Very weak diversification

The 3 months correlation between 0100 and Aeon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and Aeon Credit Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Credit Service and ES Ceramics 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 ES Ceramics Technology are associated (or correlated) with Aeon Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Credit Service has no effect on the direction of ES Ceramics i.e., ES Ceramics and Aeon Credit go up and down completely randomly.

Pair Corralation between ES Ceramics and Aeon Credit

Assuming the 90 days trading horizon ES Ceramics Technology is expected to under-perform the Aeon Credit. In addition to that, ES Ceramics is 3.75 times more volatile than Aeon Credit Service. It trades about -0.03 of its total potential returns per unit of risk. Aeon Credit Service is currently generating about -0.12 per unit of volatility. If you would invest  698.00  in Aeon Credit Service on September 5, 2024 and sell it today you would lose (57.00) from holding Aeon Credit Service or give up 8.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

ES Ceramics Technology  vs.  Aeon Credit Service

ES Ceramics Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ES Ceramics Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Aeon Credit Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Credit Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with ES Ceramics and Aeon Credit

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

The idea behind ES Ceramics Technology and Aeon Credit Service 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.