Correlation Between Top Union and ESUN Financial
Can any of the company-specific risk be diversified away by investing in both Top Union and ESUN Financial 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 Top Union and ESUN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Top Union Electronics and ESUN Financial Holding, you can compare the effects of market volatilities on Top Union and ESUN Financial 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 Top Union with a short position of ESUN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Union and ESUN Financial.
Diversification Opportunities for Top Union and ESUN Financial
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Top and ESUN is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Top Union Electronics and ESUN Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESUN Financial Holding and Top Union 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 Top Union Electronics are associated (or correlated) with ESUN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESUN Financial Holding has no effect on the direction of Top Union i.e., Top Union and ESUN Financial go up and down completely randomly.
Pair Corralation between Top Union and ESUN Financial
Assuming the 90 days trading horizon Top Union Electronics is expected to under-perform the ESUN Financial. In addition to that, Top Union is 1.55 times more volatile than ESUN Financial Holding. It trades about -0.14 of its total potential returns per unit of risk. ESUN Financial Holding is currently generating about 0.27 per unit of volatility. If you would invest 2,695 in ESUN Financial Holding on November 4, 2024 and sell it today you would earn a total of 85.00 from holding ESUN Financial Holding or generate 3.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Top Union Electronics vs. ESUN Financial Holding
Performance |
| Timeline |
| Top Union Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| ESUN Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Top Union and ESUN Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Top Union and ESUN Financial
The main advantage of trading using opposite Top Union and ESUN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Union position performs unexpectedly, ESUN Financial 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 ESUN Financial will offset losses from the drop in ESUN Financial's long position.The idea behind Top Union Electronics and ESUN Financial Holding 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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