Correlation Between Envela Corp and Signet Jewelers

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

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

Diversification Opportunities for Envela Corp and Signet Jewelers

0.56

Correlation Coefficient

Envela Corp  Signet Jewelers

Very weak diversification

The 3 months correlation between Envela and Signet is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Envela Corp and Signet Jewelers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signet Jewelers and Envela Corp 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 Envela Corp are associated (or correlated) with Signet Jewelers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signet Jewelers has no effect on the direction of Envela Corp i.e., Envela Corp and Signet Jewelers go up and down completely randomly.

Pair Corralation between Envela Corp and Signet Jewelers

Considering the 90-day investment horizon Envela Corp is expected to generate 0.67 times more return on investment than Signet Jewelers. However, Envela Corp is 1.49 times less risky than Signet Jewelers. It trades about 0.28 of its potential returns per unit of risk. Signet Jewelers is currently generating about 0.12 per unit of risk. If you would invest  491.00  in Envela Corp on August 30, 2024 and sell it today you would earn a total of  175.00  from holding Envela Corp or generate 35.64% return on investment over 90 days.

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

Envela Corp  vs.  Signet Jewelers

Envela Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Envela Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Envela Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Signet Jewelers

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Signet Jewelers are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward indicators, Signet Jewelers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Envela Corp and Signet Jewelers

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

The idea behind Envela Corp and Signet Jewelers 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.