Correlation Between Enerflex and North American

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

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

Diversification Opportunities for Enerflex and North American

0.8

Correlation Coefficient

Enerflex  North American

Very poor diversification

The 3 months correlation between Enerflex and North is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Enerflex and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const and Enerflex 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 Enerflex are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Enerflex i.e., Enerflex and North American go up and down completely randomly.

Pair Corralation between Enerflex and North American

Given the investment horizon of 90 days Enerflex is expected to generate 1.16 times more return on investment than North American. However, Enerflex is 1.16 times more volatile than North American Construction. It trades about 0.36 of its potential returns per unit of risk. North American Construction is currently generating about 0.18 per unit of risk. If you would invest  919.00  in Enerflex on October 7, 2024 and sell it today you would earn a total of  109.00  from holding Enerflex or generate 11.86% return on investment over 90 days.

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

Enerflex  vs.  North American Construction

Enerflex

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Enerflex are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enerflex unveiled solid returns over the last few months and may actually be approaching a breakup point.

North American Const

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, North American sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enerflex and North American

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

The idea behind Enerflex and North American Construction 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.