Correlation Between Dana and Ensign

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

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

Diversification Opportunities for Dana and Ensign

-0.5

Correlation Coefficient

Dana  Ensign

Very good diversification

The 3 months correlation between Dana and Ensign is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group and Dana 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 Dana Inc are associated (or correlated) with Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Dana i.e., Dana and Ensign go up and down completely randomly.

Pair Corralation between Dana and Ensign

Assuming the 90 days horizon Dana Inc is expected to under-perform the Ensign. In addition to that, Dana is 1.34 times more volatile than The Ensign Group. It trades about -0.31 of its total potential returns per unit of risk. The Ensign Group is currently generating about -0.34 per unit of volatility. If you would invest  13,494  in The Ensign Group on October 12, 2024 and sell it today you would lose (1,094) from holding The Ensign Group or give up 8.11% of portfolio value over 90 days.

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

Dana Inc  vs.  The Ensign Group

Dana Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dana reported solid returns over the last few months and may actually be approaching a breakup point.

Ensign Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 Dana and Ensign

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

The idea behind Dana Inc and The Ensign Group 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.