Correlation Between ESS and Tokocrypto
Can any of the company-specific risk be diversified away by investing in both ESS and Tokocrypto 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 ESS and Tokocrypto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESS and Tokocrypto, you can compare the effects of market volatilities on ESS and Tokocrypto 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 ESS with a short position of Tokocrypto. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESS and Tokocrypto.
Diversification Opportunities for ESS and Tokocrypto
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ESS and Tokocrypto is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ESS and Tokocrypto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokocrypto and ESS 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 ESS are associated (or correlated) with Tokocrypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokocrypto has no effect on the direction of ESS i.e., ESS and Tokocrypto go up and down completely randomly.
Pair Corralation between ESS and Tokocrypto
Assuming the 90 days trading horizon ESS is expected to generate 2.16 times more return on investment than Tokocrypto. However, ESS is 2.16 times more volatile than Tokocrypto. It trades about 0.11 of its potential returns per unit of risk. Tokocrypto is currently generating about 0.05 per unit of risk. If you would invest 0.02 in ESS on August 28, 2024 and sell it today you would earn a total of 0.00 from holding ESS or generate 13.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESS vs. Tokocrypto
Performance |
| Timeline |
| ESS |
| Tokocrypto |
ESS and Tokocrypto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESS and Tokocrypto
The main advantage of trading using opposite ESS and Tokocrypto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESS position performs unexpectedly, Tokocrypto 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 Tokocrypto will offset losses from the drop in Tokocrypto's long position.The idea behind ESS and Tokocrypto 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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