Correlation Between Ensign and InspireMD

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

Diversification Opportunities for Ensign and InspireMD

-0.63

Correlation Coefficient

Ensign  InspireMD

Excellent diversification

The 3 months correlation between Ensign and InspireMD is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and InspireMD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InspireMD 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 InspireMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InspireMD has no effect on the direction of Ensign i.e., Ensign and InspireMD go up and down completely randomly.

Pair Corralation between Ensign and InspireMD

Given the investment horizon of 90 days Ensign is expected to generate 4.6 times less return on investment than InspireMD. But when comparing it to its historical volatility, The Ensign Group is 3.97 times less risky than InspireMD. It trades about 0.06 of its potential returns per unit of risk. InspireMD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  92.00  in InspireMD on September 23, 2024 and sell it today you would earn a total of  208.00  from holding InspireMD or generate 226.09% 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.  InspireMD

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 inconsistent 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.

InspireMD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InspireMD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, InspireMD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ensign and InspireMD

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

The idea behind The Ensign Group and InspireMD 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.