Correlation Between Cineplex and ESE Entertainment

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

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

Diversification Opportunities for Cineplex and ESE Entertainment

-0.72

Correlation Coefficient

Cineplex  ESE Entertainment

Pay attention - limited upside

The 3 months correlation between Cineplex and ESE is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cineplex and ESE Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESE Entertainment and Cineplex 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 Cineplex are associated (or correlated) with ESE Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESE Entertainment has no effect on the direction of Cineplex i.e., Cineplex and ESE Entertainment go up and down completely randomly.

Pair Corralation between Cineplex and ESE Entertainment

Assuming the 90 days trading horizon Cineplex is expected to generate 0.22 times more return on investment than ESE Entertainment. However, Cineplex is 4.58 times less risky than ESE Entertainment. It trades about 0.18 of its potential returns per unit of risk. ESE Entertainment is currently generating about 0.03 per unit of risk. If you would invest  914.00  in Cineplex on April 22, 2025 and sell it today you would earn a total of  196.00  from holding Cineplex or generate 21.44% return on investment over 90 days.

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

Cineplex  vs.  ESE Entertainment

Cineplex

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cineplex are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Cineplex displayed solid returns over the last few months and may actually be approaching a breakup point.

ESE Entertainment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESE Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, ESE Entertainment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cineplex and ESE Entertainment

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

The idea behind Cineplex and ESE Entertainment 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 Transaction History module to view history of all your transactions and understand their impact on performance.