Correlation Between Esso SAF and DONTNOD Entertainment

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

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

Diversification Opportunities for Esso SAF and DONTNOD Entertainment

-0.8

Correlation Coefficient

Esso SAF  DONTNOD Entertainment

Pay attention - limited upside

The 3 months correlation between Esso and DONTNOD is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Esso SAF and DONTNOD Entertainment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONTNOD Entertainment and Esso SAF 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 Esso SAF are associated (or correlated) with DONTNOD Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONTNOD Entertainment has no effect on the direction of Esso SAF i.e., Esso SAF and DONTNOD Entertainment go up and down completely randomly.

Pair Corralation between Esso SAF and DONTNOD Entertainment

Assuming the 90 days horizon Esso SAF is expected to generate 0.86 times more return on investment than DONTNOD Entertainment. However, Esso SAF is 1.16 times less risky than DONTNOD Entertainment. It trades about 0.31 of its potential returns per unit of risk. DONTNOD Entertainment SA is currently generating about 0.15 per unit of risk. If you would invest  13,520  in Esso SAF on February 4, 2024 and sell it today you would earn a total of  3,360  from holding Esso SAF or generate 24.85% return on investment over 90 days.

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

Esso SAF  vs.  DONTNOD Entertainment SA

Esso SAF

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Esso SAF are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Esso SAF sustained solid returns over the last few months and may actually be approaching a breakup point.

DONTNOD Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DONTNOD Entertainment SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Esso SAF and DONTNOD Entertainment

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

The idea behind Esso SAF and DONTNOD Entertainment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.