Correlation Between Ensign and Cross Country

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

By analyzing existing cross correlation between The Ensign Group and Cross Country Healthcare, you can compare the effects of market volatilities on Ensign and Cross Country 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 Ensign with a short position of Cross Country. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign and Cross Country.

Diversification Opportunities for Ensign and Cross Country

-0.73

Correlation Coefficient

Ensign  Cross Country

Pay attention - limited upside

The 3 months correlation between Ensign and Cross is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and Cross Country Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cross Country Healthcare and Ensign 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 The Ensign Group are associated (or correlated) with Cross Country. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cross Country Healthcare has no effect on the direction of Ensign i.e., Ensign and Cross Country go up and down completely randomly.

Pair Corralation between Ensign and Cross Country

Given the investment horizon of 90 days The Ensign Group is expected to under-perform the Cross Country. But the stock apears to be less risky and, when comparing its historical volatility, The Ensign Group is 5.91 times less risky than Cross Country. The stock trades about -0.09 of its potential returns per unit of risk. The Cross Country Healthcare is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,239  in Cross Country Healthcare on October 8, 2024 and sell it today you would earn a total of  582.00  from holding Cross Country Healthcare or generate 46.97% return on investment over 90 days.

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

The Ensign Group  vs.  Cross Country Healthcare

Ensign Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cross Country Healthcare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cross Country Healthcare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cross Country displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ensign and Cross Country

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

The idea behind The Ensign Group and Cross Country Healthcare 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 CEOs Directory module to screen CEOs from public companies around the world.