Correlation Between American Vanguard and Enlightify

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

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

Diversification Opportunities for American Vanguard and Enlightify

0.66

Correlation Coefficient

American Vanguard  Enlightify

Poor diversification

The 3 months correlation between American and Enlightify is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Vanguard and Enlightify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enlightify and American Vanguard 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 Vanguard are associated (or correlated) with Enlightify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enlightify has no effect on the direction of American Vanguard i.e., American Vanguard and Enlightify go up and down completely randomly.

Pair Corralation between American Vanguard and Enlightify

Considering the 90-day investment horizon American Vanguard is expected to generate 3.21 times less return on investment than Enlightify. But when comparing it to its historical volatility, American Vanguard is 1.73 times less risky than Enlightify. It trades about 0.02 of its potential returns per unit of risk. Enlightify is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  103.00  in Enlightify on December 28, 2024 and sell it today you would earn a total of  6.00  from holding Enlightify or generate 5.83% return on investment over 90 days.

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

American Vanguard  vs.  Enlightify

American Vanguard

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Vanguard are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, American Vanguard is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Enlightify

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enlightify are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Enlightify showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Vanguard and Enlightify

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

The idea behind American Vanguard and Enlightify 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.