Correlation Between Ensign Energy and Birchcliff Energy

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

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

Diversification Opportunities for Ensign Energy and Birchcliff Energy

-0.68

Correlation Coefficient

Ensign Energy  Birchcliff Energy

Excellent diversification

The 3 months correlation between Ensign and Birchcliff is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ensign Energy Services and Birchcliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birchcliff Energy and Ensign Energy 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 Ensign Energy Services are associated (or correlated) with Birchcliff Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birchcliff Energy has no effect on the direction of Ensign Energy i.e., Ensign Energy and Birchcliff Energy go up and down completely randomly.

Pair Corralation between Ensign Energy and Birchcliff Energy

Assuming the 90 days trading horizon Ensign Energy Services is expected to under-perform the Birchcliff Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ensign Energy Services is 1.31 times less risky than Birchcliff Energy. The stock trades about -0.14 of its potential returns per unit of risk. The Birchcliff Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  517.00  in Birchcliff Energy on September 4, 2024 and sell it today you would lose (6.00) from holding Birchcliff Energy or give up 1.16% of portfolio value over 90 days.

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

Ensign Energy Services  vs.  Birchcliff Energy

Ensign Energy Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ensign Energy Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Ensign Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Birchcliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ensign Energy and Birchcliff Energy

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

The idea behind Ensign Energy Services and Birchcliff Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.