Correlation Between ES Ceramics and Globetronics Tech

Can any of the company-specific risk be diversified away by investing in both ES Ceramics and Globetronics Tech 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 Globetronics Tech 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 Globetronics Tech Bhd, you can compare the effects of market volatilities on ES Ceramics and Globetronics Tech 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 Globetronics Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ES Ceramics and Globetronics Tech.

Diversification Opportunities for ES Ceramics and Globetronics Tech

0.25

Correlation Coefficient

ES Ceramics  Globetronics Tech

Modest diversification

The 3 months correlation between 0100 and Globetronics is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and Globetronics Tech Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globetronics Tech Bhd 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 Globetronics Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globetronics Tech Bhd has no effect on the direction of ES Ceramics i.e., ES Ceramics and Globetronics Tech go up and down completely randomly.

Pair Corralation between ES Ceramics and Globetronics Tech

Assuming the 90 days trading horizon ES Ceramics is expected to generate 3.86 times less return on investment than Globetronics Tech. But when comparing it to its historical volatility, ES Ceramics Technology is 1.19 times less risky than Globetronics Tech. It trades about 0.02 of its potential returns per unit of risk. Globetronics Tech Bhd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Globetronics Tech Bhd on September 15, 2024 and sell it today you would earn a total of  6.00  from holding Globetronics Tech Bhd or generate 11.32% return on investment over 90 days.

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

ES Ceramics Technology  vs.  Globetronics Tech Bhd

ES Ceramics Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ES Ceramics Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, ES Ceramics is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Globetronics Tech Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globetronics Tech Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Globetronics Tech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ES Ceramics and Globetronics Tech

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

The idea behind ES Ceramics Technology and Globetronics Tech Bhd 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.