Correlation Between ESH Acquisition and Pinterest

Can any of the company-specific risk be diversified away by investing in both ESH Acquisition and Pinterest 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 Pinterest 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 Pinterest, you can compare the effects of market volatilities on ESH Acquisition and Pinterest 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 Pinterest. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESH Acquisition and Pinterest.

Diversification Opportunities for ESH Acquisition and Pinterest

0.3

Correlation Coefficient

ESH Acquisition  Pinterest

Weak diversification

The 3 months correlation between ESH and Pinterest is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ESH Acquisition Corp and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest 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 Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of ESH Acquisition i.e., ESH Acquisition and Pinterest go up and down completely randomly.

Pair Corralation between ESH Acquisition and Pinterest

Assuming the 90 days horizon ESH Acquisition Corp is expected to generate 9.87 times more return on investment than Pinterest. However, ESH Acquisition is 9.87 times more volatile than Pinterest. It trades about 0.22 of its potential returns per unit of risk. Pinterest is currently generating about 0.05 per unit of risk. If you would invest  5.96  in ESH Acquisition Corp on September 14, 2024 and sell it today you would earn a total of  3.04  from holding ESH Acquisition Corp or generate 51.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.64%
Values	Daily Returns

ESH Acquisition Corp  vs.  Pinterest

ESH Acquisition Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, ESH Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pinterest

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with ESH Acquisition and Pinterest

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

The idea behind ESH Acquisition Corp and Pinterest 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.