Correlation Between ESH Acquisition and Oaktree Specialty

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

By analyzing existing cross correlation between ESH Acquisition Corp and Oaktree Specialty Lending, you can compare the effects of market volatilities on ESH Acquisition and Oaktree Specialty 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 ESH Acquisition with a short position of Oaktree Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESH Acquisition and Oaktree Specialty.

Diversification Opportunities for ESH Acquisition and Oaktree Specialty

-0.4

Correlation Coefficient

ESH Acquisition  Oaktree Specialty

Very good diversification

The 3 months correlation between ESH and Oaktree is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ESH Acquisition Corp and Oaktree Specialty Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Specialty Lending and ESH Acquisition 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 ESH Acquisition Corp are associated (or correlated) with Oaktree Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Specialty Lending has no effect on the direction of ESH Acquisition i.e., ESH Acquisition and Oaktree Specialty go up and down completely randomly.

Pair Corralation between ESH Acquisition and Oaktree Specialty

Given the investment horizon of 90 days ESH Acquisition Corp is expected to generate 2.23 times more return on investment than Oaktree Specialty. However, ESH Acquisition is 2.23 times more volatile than Oaktree Specialty Lending. It trades about 0.24 of its potential returns per unit of risk. Oaktree Specialty Lending is currently generating about -0.07 per unit of risk. If you would invest  1,068  in ESH Acquisition Corp on September 27, 2024 and sell it today you would earn a total of  120.00  from holding ESH Acquisition Corp or generate 11.24% return on investment over 90 days.

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

ESH Acquisition Corp  vs.  Oaktree Specialty Lending

ESH Acquisition Corp

Risk-Adjusted Performance

5 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Oaktree Specialty Lending

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oaktree Specialty Lending has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Oaktree Specialty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ESH Acquisition and Oaktree Specialty

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

The idea behind ESH Acquisition Corp and Oaktree Specialty Lending 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.