Correlation Between ESE Entertainment and Royal Helium

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

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

Diversification Opportunities for ESE Entertainment and Royal Helium

0.85

Correlation Coefficient

ESE Entertainment  Royal Helium

Very poor diversification

The 3 months correlation between ESE and Royal is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ESE Entertainment and Royal Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Helium 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 Royal Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Helium has no effect on the direction of ESE Entertainment i.e., ESE Entertainment and Royal Helium go up and down completely randomly.

Pair Corralation between ESE Entertainment and Royal Helium

Assuming the 90 days horizon ESE Entertainment is expected to generate 1.38 times more return on investment than Royal Helium. However, ESE Entertainment is 1.38 times more volatile than Royal Helium. It trades about 0.01 of its potential returns per unit of risk. Royal Helium is currently generating about -0.06 per unit of risk. If you would invest  19.00  in ESE Entertainment on September 14, 2024 and sell it today you would lose (13.00) from holding ESE Entertainment or give up 68.42% of portfolio value over 90 days.

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

ESE Entertainment  vs.  Royal Helium

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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Royal Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with ESE Entertainment and Royal Helium

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

The idea behind ESE Entertainment and Royal Helium 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.