Correlation Between CES Energy and Enerflex

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

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

Diversification Opportunities for CES Energy and Enerflex

0.94

Correlation Coefficient

CES Energy  Enerflex

Almost no diversification

The 3 months correlation between CES and Enerflex is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding CES Energy Solutions and Enerflex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerflex and CES Energy 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 CES Energy Solutions are associated (or correlated) with Enerflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerflex has no effect on the direction of CES Energy i.e., CES Energy and Enerflex go up and down completely randomly.

Pair Corralation between CES Energy and Enerflex

Assuming the 90 days trading horizon CES Energy is expected to generate 4.0 times less return on investment than Enerflex. But when comparing it to its historical volatility, CES Energy Solutions is 1.33 times less risky than Enerflex. It trades about 0.09 of its potential returns per unit of risk. Enerflex is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,366  in Enerflex on October 12, 2024 and sell it today you would earn a total of  109.00  from holding Enerflex or generate 7.98% return on investment over 90 days.

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

CES Energy Solutions  vs.  Enerflex

CES Energy Solutions

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CES Energy Solutions are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CES Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Enerflex

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Enerflex are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Enerflex displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CES Energy and Enerflex

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

The idea behind CES Energy Solutions and Enerflex 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.