Correlation Between Enghouse Systems and ISign Media

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

By analyzing existing cross correlation between Enghouse Systems and iSign Media Solutions, you can compare the effects of market volatilities on Enghouse Systems and ISign Media 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 Enghouse Systems with a short position of ISign Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enghouse Systems and ISign Media.

Diversification Opportunities for Enghouse Systems and ISign Media

0.38

Correlation Coefficient

Enghouse Systems  ISign Media

Weak diversification

The 3 months correlation between Enghouse and ISign is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Enghouse Systems and iSign Media Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iSign Media Solutions and Enghouse Systems 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 Enghouse Systems are associated (or correlated) with ISign Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iSign Media Solutions has no effect on the direction of Enghouse Systems i.e., Enghouse Systems and ISign Media go up and down completely randomly.

Pair Corralation between Enghouse Systems and ISign Media

Assuming the 90 days trading horizon Enghouse Systems is expected to generate 1.98 times more return on investment than ISign Media. However, Enghouse Systems is 1.98 times more volatile than iSign Media Solutions. It trades about 0.02 of its potential returns per unit of risk. iSign Media Solutions is currently generating about 0.01 per unit of risk. If you would invest  2,870  in Enghouse Systems on September 4, 2024 and sell it today you would earn a total of  47.00  from holding Enghouse Systems or generate 1.64% return on investment over 90 days.

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

Enghouse Systems  vs.  iSign Media Solutions

Enghouse Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enghouse Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Enghouse Systems is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iSign Media Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iSign Media Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ISign Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Enghouse Systems and ISign Media

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

The idea behind Enghouse Systems and iSign Media Solutions 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.