Correlation Between Enghouse Systems and LifeSpeak

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

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

Diversification Opportunities for Enghouse Systems and LifeSpeak

0.11

Correlation Coefficient

Enghouse Systems  LifeSpeak

Average diversification

The 3 months correlation between Enghouse and LifeSpeak is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Enghouse Systems Limited and LifeSpeak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LifeSpeak and Enghouse Systems 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 Enghouse Systems Limited are associated (or correlated) with LifeSpeak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LifeSpeak has no effect on the direction of Enghouse Systems i.e., Enghouse Systems and LifeSpeak go up and down completely randomly.

Pair Corralation between Enghouse Systems and LifeSpeak

Assuming the 90 days horizon Enghouse Systems Limited is expected to generate 0.33 times more return on investment than LifeSpeak. However, Enghouse Systems Limited is 3.0 times less risky than LifeSpeak. It trades about 0.01 of its potential returns per unit of risk. LifeSpeak is currently generating about -0.06 per unit of risk. If you would invest  2,121  in Enghouse Systems Limited on September 5, 2024 and sell it today you would earn a total of  2.00  from holding Enghouse Systems Limited or generate 0.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Enghouse Systems Limited  vs.  LifeSpeak

Enghouse Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enghouse Systems Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Enghouse Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

LifeSpeak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LifeSpeak has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Enghouse Systems and LifeSpeak

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

The idea behind Enghouse Systems Limited and LifeSpeak 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.