Correlation Between Converge Technology and Enthusiast Gaming

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

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

Diversification Opportunities for Converge Technology and Enthusiast Gaming

-0.09

Correlation Coefficient

Converge Technology  Enthusiast Gaming

Good diversification

The 3 months correlation between Converge and Enthusiast is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Converge Technology Solutions and Enthusiast Gaming Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enthusiast Gaming and Converge Technology 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 Converge Technology Solutions are associated (or correlated) with Enthusiast Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enthusiast Gaming has no effect on the direction of Converge Technology i.e., Converge Technology and Enthusiast Gaming go up and down completely randomly.

Pair Corralation between Converge Technology and Enthusiast Gaming

Assuming the 90 days trading horizon Converge Technology Solutions is expected to under-perform the Enthusiast Gaming. But the stock apears to be less risky and, when comparing its historical volatility, Converge Technology Solutions is 1.28 times less risky than Enthusiast Gaming. The stock trades about -0.1 of its potential returns per unit of risk. The Enthusiast Gaming Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Enthusiast Gaming Holdings on September 5, 2024 and sell it today you would earn a total of  2.00  from holding Enthusiast Gaming Holdings or generate 14.29% return on investment over 90 days.

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

Converge Technology Solutions  vs.  Enthusiast Gaming Holdings

Converge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Enthusiast Gaming

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enthusiast Gaming Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Enthusiast Gaming displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Converge Technology and Enthusiast Gaming

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

The idea behind Converge Technology Solutions and Enthusiast Gaming Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.