Correlation Between All American and Ennis

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

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

Diversification Opportunities for All American and Ennis

0.13

Correlation Coefficient

All American  Ennis

Average diversification

The 3 months correlation between All and Ennis is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding All American Pet and Ennis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ennis Inc and All American 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 All American Pet are associated (or correlated) with Ennis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ennis Inc has no effect on the direction of All American i.e., All American and Ennis go up and down completely randomly.

Pair Corralation between All American and Ennis

Given the investment horizon of 90 days All American Pet is expected to under-perform the Ennis. In addition to that, All American is 20.2 times more volatile than Ennis Inc. It trades about -0.23 of its total potential returns per unit of risk. Ennis Inc is currently generating about -0.13 per unit of volatility. If you would invest  2,142  in Ennis Inc on October 12, 2024 and sell it today you would lose (67.00) from holding Ennis Inc or give up 3.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

All American Pet  vs.  Ennis Inc

All American Pet

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in All American Pet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, All American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ennis Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Ennis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Ennis is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with All American and Ennis

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

The idea behind All American Pet and Ennis Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.