Correlation Between Focus Home and ENN Energy

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

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

Diversification Opportunities for Focus Home and ENN Energy

0.43

Correlation Coefficient

Focus Home  ENN Energy

Very weak diversification

The 3 months correlation between Focus and ENN is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive and ENN Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENN Energy Holdings and Focus Home 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 Focus Home Interactive are associated (or correlated) with ENN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENN Energy Holdings has no effect on the direction of Focus Home i.e., Focus Home and ENN Energy go up and down completely randomly.

Pair Corralation between Focus Home and ENN Energy

Assuming the 90 days horizon Focus Home Interactive is expected to under-perform the ENN Energy. In addition to that, Focus Home is 1.28 times more volatile than ENN Energy Holdings. It trades about -0.02 of its total potential returns per unit of risk. ENN Energy Holdings is currently generating about 0.04 per unit of volatility. If you would invest  665.00  in ENN Energy Holdings on December 20, 2024 and sell it today you would earn a total of  30.00  from holding ENN Energy Holdings or generate 4.51% return on investment over 90 days.

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

Focus Home Interactive  vs.  ENN Energy Holdings

Focus Home Interactive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Focus Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ENN Energy Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, ENN Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Focus Home and ENN Energy

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

The idea behind Focus Home Interactive and ENN Energy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.