Correlation Between Ensign and NRX Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Ensign and NRX Pharmaceuticals 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 NRX Pharmaceuticals 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 NRX Pharmaceuticals, you can compare the effects of market volatilities on Ensign and NRX Pharmaceuticals 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 NRX Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign and NRX Pharmaceuticals.

Diversification Opportunities for Ensign and NRX Pharmaceuticals

-0.46

Correlation Coefficient

Ensign  NRX Pharmaceuticals

Very good diversification

The 3 months correlation between Ensign and NRX is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and NRX Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRX Pharmaceuticals 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 NRX Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRX Pharmaceuticals has no effect on the direction of Ensign i.e., Ensign and NRX Pharmaceuticals go up and down completely randomly.

Pair Corralation between Ensign and NRX Pharmaceuticals

Given the investment horizon of 90 days The Ensign Group is expected to generate 0.54 times more return on investment than NRX Pharmaceuticals. However, The Ensign Group is 1.86 times less risky than NRX Pharmaceuticals. It trades about -0.14 of its potential returns per unit of risk. NRX Pharmaceuticals is currently generating about -0.27 per unit of risk. If you would invest  14,242  in The Ensign Group on December 3, 2024 and sell it today you would lose (1,255) from holding The Ensign Group or give up 8.81% of portfolio value over 90 days.

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

The Ensign Group  vs.  NRX Pharmaceuticals

Ensign Group

Risk-Adjusted Performance

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.

NRX Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NRX Pharmaceuticals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, NRX Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ensign and NRX Pharmaceuticals

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

The idea behind The Ensign Group and NRX Pharmaceuticals 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.