Correlation Between Data Communications and Enerflex

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

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

Diversification Opportunities for Data Communications and Enerflex

-0.88

Correlation Coefficient

Data Communications  Enerflex

Pay attention - limited upside

The 3 months correlation between Data and Enerflex is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Data Communications Management and Enerflex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerflex and Data Communications 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 Data Communications Management are associated (or correlated) with Enerflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerflex has no effect on the direction of Data Communications i.e., Data Communications and Enerflex go up and down completely randomly.

Pair Corralation between Data Communications and Enerflex

Assuming the 90 days trading horizon Data Communications Management is expected to under-perform the Enerflex. In addition to that, Data Communications is 3.64 times more volatile than Enerflex. It trades about -0.07 of its total potential returns per unit of risk. Enerflex is currently generating about 0.58 per unit of volatility. If you would invest  1,039  in Enerflex on September 13, 2024 and sell it today you would earn a total of  327.00  from holding Enerflex or generate 31.47% return on investment over 90 days.

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

Data Communications Management  vs.  Enerflex

Data Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Enerflex

Risk-Adjusted Performance

39 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Enerflex are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Enerflex displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Communications and Enerflex

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

The idea behind Data Communications Management and Enerflex 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.