Correlation Between EVI Industries and DXP Enterprises

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

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

Diversification Opportunities for EVI Industries and DXP Enterprises

0.26

Correlation Coefficient

EVI Industries  DXP Enterprises

Modest diversification

The 3 months correlation between EVI and DXP is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding EVI Industries and DXP Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXP Enterprises and EVI Industries 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 EVI Industries are associated (or correlated) with DXP Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXP Enterprises has no effect on the direction of EVI Industries i.e., EVI Industries and DXP Enterprises go up and down completely randomly.

Pair Corralation between EVI Industries and DXP Enterprises

Considering the 90-day investment horizon EVI Industries is expected to generate 1.2 times less return on investment than DXP Enterprises. But when comparing it to its historical volatility, EVI Industries is 1.04 times less risky than DXP Enterprises. It trades about 0.14 of its potential returns per unit of risk. DXP Enterprises is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,360  in DXP Enterprises on September 2, 2024 and sell it today you would earn a total of  1,967  from holding DXP Enterprises or generate 36.7% return on investment over 90 days.

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

EVI Industries  vs.  DXP Enterprises

EVI Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EVI Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, EVI Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

DXP Enterprises

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DXP Enterprises are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DXP Enterprises exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EVI Industries and DXP Enterprises

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

The idea behind EVI Industries and DXP Enterprises 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.