Correlation Between CES Energy and Enterprise

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

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

Diversification Opportunities for CES Energy and Enterprise

-0.06

Correlation Coefficient

CES Energy  Enterprise

Good diversification

The 3 months correlation between CES and Enterprise is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CES Energy Solutions and Enterprise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Group and CES Energy 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 CES Energy Solutions are associated (or correlated) with Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Group has no effect on the direction of CES Energy i.e., CES Energy and Enterprise go up and down completely randomly.

Pair Corralation between CES Energy and Enterprise

Assuming the 90 days horizon CES Energy Solutions is expected to generate 0.58 times more return on investment than Enterprise. However, CES Energy Solutions is 1.73 times less risky than Enterprise. It trades about 0.15 of its potential returns per unit of risk. Enterprise Group is currently generating about 0.05 per unit of risk. If you would invest  530.00  in CES Energy Solutions on September 12, 2024 and sell it today you would earn a total of  140.00  from holding CES Energy Solutions or generate 26.42% return on investment over 90 days.

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

CES Energy Solutions  vs.  Enterprise Group

CES Energy Solutions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CES Energy Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, CES Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Enterprise Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Enterprise reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CES Energy and Enterprise

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

The idea behind CES Energy Solutions and Enterprise Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.