Correlation Between ESE Entertainment and Therma Bright
Can any of the company-specific risk be diversified away by investing in both ESE Entertainment and Therma Bright 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 Therma Bright into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESE Entertainment and Therma Bright, you can compare the effects of market volatilities on ESE Entertainment and Therma Bright 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 Therma Bright. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESE Entertainment and Therma Bright.
Diversification Opportunities for ESE Entertainment and Therma Bright
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESE and Therma is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ESE Entertainment and Therma Bright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therma Bright 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 Therma Bright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therma Bright has no effect on the direction of ESE Entertainment i.e., ESE Entertainment and Therma Bright go up and down completely randomly.
Pair Corralation between ESE Entertainment and Therma Bright
Assuming the 90 days horizon ESE Entertainment is expected to generate 0.52 times more return on investment than Therma Bright. However, ESE Entertainment is 1.94 times less risky than Therma Bright. It trades about -0.15 of its potential returns per unit of risk. Therma Bright is currently generating about -0.09 per unit of risk. If you would invest 12.00 in ESE Entertainment on September 12, 2024 and sell it today you would lose (6.00) from holding ESE Entertainment or give up 50.0% 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. Therma Bright
Performance |
Timeline |
ESE Entertainment |
Therma Bright |
ESE Entertainment and Therma Bright Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ESE Entertainment and Therma Bright
The main advantage of trading using opposite ESE Entertainment and Therma Bright positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESE Entertainment position performs unexpectedly, Therma Bright 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 Therma Bright will offset losses from the drop in Therma Bright's long position.ESE Entertainment vs. Berkshire Hathaway CDR | ESE Entertainment vs. Microsoft Corp CDR | ESE Entertainment vs. Apple Inc CDR | ESE Entertainment vs. Alphabet Inc CDR |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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