Correlation Between Ensign and NexGel Warrant

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

Diversification Opportunities for Ensign and NexGel Warrant

-0.6

Correlation Coefficient

Ensign  NexGel Warrant

Excellent diversification

The 3 months correlation between Ensign and NexGel is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and NexGel Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGel Warrant 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 NexGel Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGel Warrant has no effect on the direction of Ensign i.e., Ensign and NexGel Warrant go up and down completely randomly.

Pair Corralation between Ensign and NexGel Warrant

Given the investment horizon of 90 days Ensign is expected to generate 73.48 times less return on investment than NexGel Warrant. But when comparing it to its historical volatility, The Ensign Group is 65.63 times less risky than NexGel Warrant. It trades about 0.08 of its potential returns per unit of risk. NexGel Warrant is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  39.00  in NexGel Warrant on October 3, 2024 and sell it today you would earn a total of  36.00  from holding NexGel Warrant or generate 92.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	70.05%
Values	Daily Returns

The Ensign Group  vs.  NexGel Warrant

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.

NexGel Warrant

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NexGel Warrant are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, NexGel Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ensign and NexGel Warrant

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

The idea behind The Ensign Group and NexGel Warrant 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.