Correlation Between Neoen SA and Esker SA

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

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

Diversification Opportunities for Neoen SA and Esker SA

0.71

Correlation Coefficient

Neoen SA  Esker SA

Poor diversification

The 3 months correlation between Neoen and Esker is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Neoen SA and Esker SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esker SA and Neoen SA 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 Neoen SA are associated (or correlated) with Esker SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esker SA has no effect on the direction of Neoen SA i.e., Neoen SA and Esker SA go up and down completely randomly.

Pair Corralation between Neoen SA and Esker SA

Assuming the 90 days trading horizon Neoen SA is expected to generate 4.86 times less return on investment than Esker SA. But when comparing it to its historical volatility, Neoen SA is 8.96 times less risky than Esker SA. It trades about 0.18 of its potential returns per unit of risk. Esker SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  23,620  in Esker SA on September 3, 2024 and sell it today you would earn a total of  2,440  from holding Esker SA or generate 10.33% return on investment over 90 days.

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

Neoen SA  vs.  Esker SA

Neoen SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neoen SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Neoen SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Esker SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Esker SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Esker SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Neoen SA and Esker SA

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

The idea behind Neoen SA and Esker SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.