Correlation Between Enpro and Dream Finders

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

By analyzing existing cross correlation between Enpro Industries 575 and Dream Finders Homes, you can compare the effects of market volatilities on Enpro and Dream Finders 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 Enpro with a short position of Dream Finders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enpro and Dream Finders.

Diversification Opportunities for Enpro and Dream Finders

0.02

Correlation Coefficient

Enpro  Dream Finders

Significant diversification

The 3 months correlation between Enpro and Dream is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Enpro Industries 575 and Dream Finders Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Finders Homes and Enpro 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 Enpro Industries 575 are associated (or correlated) with Dream Finders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Finders Homes has no effect on the direction of Enpro i.e., Enpro and Dream Finders go up and down completely randomly.

Pair Corralation between Enpro and Dream Finders

Assuming the 90 days trading horizon Enpro Industries 575 is expected to generate 0.1 times more return on investment than Dream Finders. However, Enpro Industries 575 is 9.63 times less risky than Dream Finders. It trades about -0.12 of its potential returns per unit of risk. Dream Finders Homes is currently generating about -0.03 per unit of risk. If you would invest  9,975  in Enpro Industries 575 on September 12, 2024 and sell it today you would lose (226.00) from holding Enpro Industries 575 or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Enpro Industries 575  vs.  Dream Finders Homes

Enpro Industries 575

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enpro Industries 575 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Enpro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dream Finders Homes

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Enpro and Dream Finders

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

The idea behind Enpro Industries 575 and Dream Finders Homes 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.