Correlation Between 70GD and Essensys PLC

Can any of the company-specific risk be diversified away by investing in both 70GD and Essensys PLC 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 70GD and Essensys PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 70GD and Essensys PLC, you can compare the effects of market volatilities on 70GD and Essensys PLC 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 70GD with a short position of Essensys PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of 70GD and Essensys PLC.

Diversification Opportunities for 70GD and Essensys PLC

0.69

Correlation Coefficient

70GD  Essensys PLC

Poor diversification

The 3 months correlation between 70GD and Essensys is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding 70GD and Essensys PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essensys PLC and 70GD 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 70GD are associated (or correlated) with Essensys PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essensys PLC has no effect on the direction of 70GD i.e., 70GD and Essensys PLC go up and down completely randomly.

Pair Corralation between 70GD and Essensys PLC

Assuming the 90 days trading horizon 70GD is expected to generate 2.89 times less return on investment than Essensys PLC. But when comparing it to its historical volatility, 70GD is 3.54 times less risky than Essensys PLC. It trades about 0.13 of its potential returns per unit of risk. Essensys PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,850  in Essensys PLC on September 29, 2024 and sell it today you would earn a total of  350.00  from holding Essensys PLC or generate 12.28% return on investment over 90 days.

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

70GD  vs.  Essensys PLC

70GD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 70GD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, 70GD is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Essensys PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essensys PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Essensys PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 70GD and Essensys PLC

The main advantage of trading using opposite 70GD and Essensys PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 70GD position performs unexpectedly, Essensys PLC 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 Essensys PLC will offset losses from the drop in Essensys PLC's long position.

The idea behind 70GD and Essensys PLC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.