Correlation Between Encompass Holdings and Timken

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

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

Diversification Opportunities for Encompass Holdings and Timken

0.0

Correlation Coefficient

Encompass Holdings  Timken

Pay attention - limited upside

The 3 months correlation between Encompass and Timken is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Encompass Holdings and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company and Encompass 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 Encompass Holdings are associated (or correlated) with Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Encompass Holdings i.e., Encompass Holdings and Timken go up and down completely randomly.

Pair Corralation between Encompass Holdings and Timken

If you would invest  0.01  in Encompass Holdings on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Encompass Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Encompass Holdings  vs.  Timken Company

Encompass Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encompass Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Encompass Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Encompass Holdings and Timken

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

The idea behind Encompass Holdings and Timken Company 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.