Correlation Between Enerflex and Richelieu Hardware

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

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

Diversification Opportunities for Enerflex and Richelieu Hardware

0.21

Correlation Coefficient

Enerflex  Richelieu Hardware

Modest diversification

The 3 months correlation between Enerflex and Richelieu is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Enerflex and Richelieu Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richelieu Hardware and Enerflex 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 Enerflex are associated (or correlated) with Richelieu Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richelieu Hardware has no effect on the direction of Enerflex i.e., Enerflex and Richelieu Hardware go up and down completely randomly.

Pair Corralation between Enerflex and Richelieu Hardware

Assuming the 90 days trading horizon Enerflex is expected to generate 1.42 times more return on investment than Richelieu Hardware. However, Enerflex is 1.42 times more volatile than Richelieu Hardware. It trades about 0.51 of its potential returns per unit of risk. Richelieu Hardware is currently generating about 0.0 per unit of risk. If you would invest  725.00  in Enerflex on September 13, 2024 and sell it today you would earn a total of  641.00  from holding Enerflex or generate 88.41% return on investment over 90 days.

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

Enerflex  vs.  Richelieu Hardware

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.

Richelieu Hardware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Richelieu Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Richelieu Hardware is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enerflex and Richelieu Hardware

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

The idea behind Enerflex and Richelieu Hardware 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..