Correlation Between Ensign and Patterson Companies

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

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

Diversification Opportunities for Ensign and Patterson Companies

-0.73

Correlation Coefficient

Ensign  Patterson Companies

Pay attention - limited upside

The 3 months correlation between Ensign and Patterson is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies and Ensign 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 The Ensign Group are associated (or correlated) with Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Ensign i.e., Ensign and Patterson Companies go up and down completely randomly.

Pair Corralation between Ensign and Patterson Companies

Given the investment horizon of 90 days The Ensign Group is expected to under-perform the Patterson Companies. But the stock apears to be less risky and, when comparing its historical volatility, The Ensign Group is 3.33 times less risky than Patterson Companies. The stock trades about -0.08 of its potential returns per unit of risk. The Patterson Companies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,082  in Patterson Companies on October 1, 2024 and sell it today you would earn a total of  1,003  from holding Patterson Companies or generate 48.17% return on investment over 90 days.

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

The Ensign Group  vs.  Patterson Companies

Ensign Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Patterson Companies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Patterson Companies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ensign and Patterson Companies

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

The idea behind The Ensign Group and Patterson Companies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.