Correlation Between Enterprise and High Arctic

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

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

Diversification Opportunities for Enterprise and High Arctic

-0.31

Correlation Coefficient

Enterprise  High Arctic

Very good diversification

The 3 months correlation between Enterprise and High is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Group and High Arctic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Arctic Energy and Enterprise 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 Enterprise Group are associated (or correlated) with High Arctic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Arctic Energy has no effect on the direction of Enterprise i.e., Enterprise and High Arctic go up and down completely randomly.

Pair Corralation between Enterprise and High Arctic

Assuming the 90 days horizon Enterprise Group is expected to generate 1.59 times more return on investment than High Arctic. However, Enterprise is 1.59 times more volatile than High Arctic Energy. It trades about 0.12 of its potential returns per unit of risk. High Arctic Energy is currently generating about -0.1 per unit of risk. If you would invest  112.00  in Enterprise Group on September 4, 2024 and sell it today you would earn a total of  36.00  from holding Enterprise Group or generate 32.14% return on investment over 90 days.

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

Enterprise Group  vs.  High Arctic Energy

Enterprise Group

Risk-Adjusted Performance

9 of 100

OK

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

High Arctic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Arctic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Enterprise and High Arctic

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

The idea behind Enterprise Group and High Arctic 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.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.