Correlation Between ESE Entertainment and Roku

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

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

Diversification Opportunities for ESE Entertainment and Roku

-0.24

Correlation Coefficient

ESE Entertainment  Roku

Very good diversification

The 3 months correlation between ESE and Roku is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ESE Entertainment and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc and ESE Entertainment 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 ESE Entertainment are associated (or correlated) with Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of ESE Entertainment i.e., ESE Entertainment and Roku go up and down completely randomly.

Pair Corralation between ESE Entertainment and Roku

Assuming the 90 days horizon ESE Entertainment is expected to under-perform the Roku. In addition to that, ESE Entertainment is 2.19 times more volatile than Roku Inc. It trades about 0.0 of its total potential returns per unit of risk. Roku Inc is currently generating about 0.05 per unit of volatility. If you would invest  4,056  in Roku Inc on September 21, 2024 and sell it today you would earn a total of  3,787  from holding Roku Inc or generate 93.37% return on investment over 90 days.

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

ESE Entertainment  vs.  Roku Inc

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.

Roku Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Roku may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ESE Entertainment and Roku

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

The idea behind ESE Entertainment and Roku Inc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.