Correlation Between Ensign Energy and Secure Energy

Can any of the company-specific risk be diversified away by investing in both Ensign Energy and Secure 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 Secure 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 Secure Energy Services, you can compare the effects of market volatilities on Ensign Energy and Secure 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 Secure Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign Energy and Secure Energy.

Diversification Opportunities for Ensign Energy and Secure Energy

0.92

Correlation Coefficient

Ensign Energy  Secure Energy

Almost no diversification

The 3 months correlation between Ensign and Secure is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ensign Energy Services and Secure Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secure Energy Services 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 Secure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secure Energy Services has no effect on the direction of Ensign Energy i.e., Ensign Energy and Secure Energy go up and down completely randomly.

Pair Corralation between Ensign Energy and Secure Energy

Assuming the 90 days trading horizon Ensign Energy is expected to generate 1.49 times less return on investment than Secure Energy. In addition to that, Ensign Energy is 1.14 times more volatile than Secure Energy Services. It trades about 0.13 of its total potential returns per unit of risk. Secure Energy Services is currently generating about 0.23 per unit of volatility. If you would invest  1,188  in Secure Energy Services on September 3, 2024 and sell it today you would earn a total of  397.00  from holding Secure Energy Services or generate 33.42% return on investment over 90 days.

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

Ensign Energy Services  vs.  Secure Energy Services

Ensign Energy Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ensign Energy Services are ranked lower than 10 (%) 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.

Secure Energy Services

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Secure Energy Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Secure Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ensign Energy and Secure Energy

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

The idea behind Ensign Energy Services and Secure Energy Services 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.