Correlation Between Timken and Encompass Holdings

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

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

Diversification Opportunities for Timken and Encompass Holdings

0.0

Correlation Coefficient

Timken  Encompass Holdings

Pay attention - limited upside

The 3 months correlation between Timken and Encompass is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Encompass Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encompass Holdings and Timken 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 Timken Company are associated (or correlated) with Encompass Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encompass Holdings has no effect on the direction of Timken i.e., Timken and Encompass Holdings go up and down completely randomly.

Pair Corralation between Timken and Encompass Holdings

If you would invest  7,125  in Timken Company on September 26, 2024 and sell it today you would earn a total of  58.00  from holding Timken Company or generate 0.81% return on investment over 90 days.

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

Timken Company  vs.  Encompass Holdings

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Encompass Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encompass Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Encompass Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Timken and Encompass Holdings

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

The idea behind Timken Company and Encompass Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .