Correlation Between Westaim Corp and Enerflex

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

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

Diversification Opportunities for Westaim Corp and Enerflex

0.78

Correlation Coefficient

Westaim Corp  Enerflex

Poor diversification

The 3 months correlation between Westaim and Enerflex is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Westaim Corp and Enerflex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerflex and Westaim Corp 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 Westaim Corp are associated (or correlated) with Enerflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerflex has no effect on the direction of Westaim Corp i.e., Westaim Corp and Enerflex go up and down completely randomly.

Pair Corralation between Westaim Corp and Enerflex

Assuming the 90 days horizon Westaim Corp is expected to generate 1.72 times less return on investment than Enerflex. In addition to that, Westaim Corp is 1.22 times more volatile than Enerflex. It trades about 0.18 of its total potential returns per unit of risk. Enerflex is currently generating about 0.37 per unit of volatility. If you would invest  785.00  in Enerflex on September 4, 2024 and sell it today you would earn a total of  497.00  from holding Enerflex or generate 63.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Westaim Corp  vs.  Enerflex

Westaim Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westaim Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Westaim Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Enerflex

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Enerflex are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Enerflex displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westaim Corp and Enerflex

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

The idea behind Westaim Corp and Enerflex 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.