Correlation Between American Shared and Ensign

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

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

Diversification Opportunities for American Shared and Ensign

0.57

Correlation Coefficient

American Shared  Ensign

Very weak diversification

The 3 months correlation between American and Ensign is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Shared Hospital and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group and American Shared 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 American Shared Hospital 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 American Shared i.e., American Shared and Ensign go up and down completely randomly.

Pair Corralation between American Shared and Ensign

Considering the 90-day investment horizon American Shared Hospital is expected to under-perform the Ensign. But the stock apears to be less risky and, when comparing its historical volatility, American Shared Hospital is 1.1 times less risky than Ensign. The stock trades about -0.09 of its potential returns per unit of risk. The The Ensign Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  13,272  in The Ensign Group on December 29, 2024 and sell it today you would lose (428.00) from holding The Ensign Group or give up 3.22% of portfolio value over 90 days.

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

American Shared Hospital  vs.  The Ensign Group

American Shared Hospital

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Shared Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ensign Group

Risk-Adjusted Performance

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 nearly stable basic indicators, Ensign is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Shared and Ensign

The main advantage of trading using opposite American Shared and Ensign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Shared 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 American Shared Hospital 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.