Correlation Between Enerflex and NPK International

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

By analyzing existing cross correlation between Enerflex and NPK International, you can compare the effects of market volatilities on Enerflex and NPK International 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 NPK International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enerflex and NPK International.

Diversification Opportunities for Enerflex and NPK International

0.74

Correlation Coefficient

Enerflex  NPK International

Poor diversification

The 3 months correlation between Enerflex and NPK is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Enerflex and NPK International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NPK International 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 NPK International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NPK International has no effect on the direction of Enerflex i.e., Enerflex and NPK International go up and down completely randomly.

Pair Corralation between Enerflex and NPK International

Given the investment horizon of 90 days Enerflex is expected to generate 0.79 times more return on investment than NPK International. However, Enerflex is 1.26 times less risky than NPK International. It trades about 0.4 of its potential returns per unit of risk. NPK International is currently generating about 0.07 per unit of risk. If you would invest  659.00  in Enerflex on October 9, 2024 and sell it today you would earn a total of  370.00  from holding Enerflex or generate 56.15% return on investment over 90 days.

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

Enerflex  vs.  NPK International

Enerflex

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Enerflex are ranked lower than 31 (%) 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.

NPK International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NPK International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward-looking signals, NPK International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Enerflex and NPK International

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

The idea behind Enerflex and NPK International 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.