Correlation Between ESGL Holdings and HNI Corp

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

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

Diversification Opportunities for ESGL Holdings and HNI Corp

-0.85

Correlation Coefficient

ESGL Holdings  HNI Corp

Pay attention - limited upside

The 3 months correlation between ESGL and HNI is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corp and ESGL Holdings 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 ESGL Holdings Limited are associated (or correlated) with HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of ESGL Holdings i.e., ESGL Holdings and HNI Corp go up and down completely randomly.

Pair Corralation between ESGL Holdings and HNI Corp

Given the investment horizon of 90 days ESGL Holdings Limited is expected to generate 3.44 times more return on investment than HNI Corp. However, ESGL Holdings is 3.44 times more volatile than HNI Corp. It trades about 0.1 of its potential returns per unit of risk. HNI Corp is currently generating about -0.07 per unit of risk. If you would invest  138.00  in ESGL Holdings Limited on January 13, 2025 and sell it today you would earn a total of  50.00  from holding ESGL Holdings Limited or generate 36.23% return on investment over 90 days.

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

ESGL Holdings Limited  vs.  HNI Corp

ESGL Holdings Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, ESGL Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

HNI Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with ESGL Holdings and HNI Corp

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

The idea behind ESGL Holdings Limited and HNI Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.