Correlation Between Enghouse Systems and Clarke

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

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

Diversification Opportunities for Enghouse Systems and Clarke

0.64

Correlation Coefficient

Enghouse Systems  Clarke

Poor diversification

The 3 months correlation between Enghouse and Clarke is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Enghouse Systems and Clarke Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarke Inc 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 are associated (or correlated) with Clarke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarke Inc has no effect on the direction of Enghouse Systems i.e., Enghouse Systems and Clarke go up and down completely randomly.

Pair Corralation between Enghouse Systems and Clarke

Assuming the 90 days trading horizon Enghouse Systems is expected to under-perform the Clarke. In addition to that, Enghouse Systems is 8.26 times more volatile than Clarke Inc. It trades about -0.09 of its total potential returns per unit of risk. Clarke Inc is currently generating about -0.1 per unit of volatility. If you would invest  2,398  in Clarke Inc on October 9, 2024 and sell it today you would lose (38.00) from holding Clarke Inc or give up 1.58% of portfolio value over 90 days.

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

Enghouse Systems  vs.  Clarke Inc

Enghouse Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enghouse Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Clarke Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarke Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Clarke is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enghouse Systems and Clarke

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

The idea behind Enghouse Systems and Clarke Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.