Correlation Between Great Lakes and ENGlobal

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

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

Diversification Opportunities for Great Lakes and ENGlobal

0.08

Correlation Coefficient

Great Lakes  ENGlobal

Significant diversification

The 3 months correlation between Great and ENGlobal is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and ENGlobal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGlobal and Great Lakes 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 Great Lakes Dredge are associated (or correlated) with ENGlobal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGlobal has no effect on the direction of Great Lakes i.e., Great Lakes and ENGlobal go up and down completely randomly.

Pair Corralation between Great Lakes and ENGlobal

Given the investment horizon of 90 days Great Lakes Dredge is expected to generate 0.37 times more return on investment than ENGlobal. However, Great Lakes Dredge is 2.69 times less risky than ENGlobal. It trades about 0.23 of its potential returns per unit of risk. ENGlobal is currently generating about -0.02 per unit of risk. If you would invest  946.00  in Great Lakes Dredge on August 31, 2024 and sell it today you would earn a total of  306.00  from holding Great Lakes Dredge or generate 32.35% return on investment over 90 days.

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

Great Lakes Dredge  vs.  ENGlobal

Great Lakes Dredge

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great Lakes Dredge are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Great Lakes exhibited solid returns over the last few months and may actually be approaching a breakup point.

ENGlobal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGlobal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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.

Pair Trading with Great Lakes and ENGlobal

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

The idea behind Great Lakes Dredge and ENGlobal 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.