Correlation Between Butterfly Network and ESE Entertainment

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

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

Diversification Opportunities for Butterfly Network and ESE Entertainment

-0.9

Correlation Coefficient

Butterfly Network  ESE Entertainment

Pay attention - limited upside

The 3 months correlation between Butterfly and ESE is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and ESE Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESE Entertainment and Butterfly Network 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 Butterfly Network are associated (or correlated) with ESE Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESE Entertainment has no effect on the direction of Butterfly Network i.e., Butterfly Network and ESE Entertainment go up and down completely randomly.

Pair Corralation between Butterfly Network and ESE Entertainment

Given the investment horizon of 90 days Butterfly Network is expected to generate 0.83 times more return on investment than ESE Entertainment. However, Butterfly Network is 1.2 times less risky than ESE Entertainment. It trades about 0.21 of its potential returns per unit of risk. ESE Entertainment is currently generating about -0.1 per unit of risk. If you would invest  177.00  in Butterfly Network on September 30, 2024 and sell it today you would earn a total of  169.00  from holding Butterfly Network or generate 95.48% return on investment over 90 days.

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

Butterfly Network  vs.  ESE Entertainment

Butterfly Network

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network showed solid returns over the last few months and may actually be approaching a breakup point.

ESE Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESE Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Butterfly Network and ESE Entertainment

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

The idea behind Butterfly Network and ESE Entertainment 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.