Correlation Between Enovix Corp and ESS Tech

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

By analyzing existing cross correlation between Enovix Corp and ESS Tech, you can compare the effects of market volatilities on Enovix Corp and ESS Tech 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 Enovix Corp with a short position of ESS Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enovix Corp and ESS Tech.

Diversification Opportunities for Enovix Corp and ESS Tech

0.44

Correlation Coefficient

Enovix Corp  ESS Tech

Very weak diversification

The 3 months correlation between Enovix and ESS is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Enovix Corp and ESS Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESS Tech and Enovix Corp 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 Enovix Corp are associated (or correlated) with ESS Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESS Tech has no effect on the direction of Enovix Corp i.e., Enovix Corp and ESS Tech go up and down completely randomly.

Pair Corralation between Enovix Corp and ESS Tech

Given the investment horizon of 90 days Enovix Corp is expected to generate 0.52 times more return on investment than ESS Tech. However, Enovix Corp is 1.94 times less risky than ESS Tech. It trades about -0.1 of its potential returns per unit of risk. ESS Tech is currently generating about -0.07 per unit of risk. If you would invest  1,063  in Enovix Corp on August 30, 2024 and sell it today you would lose (140.00) from holding Enovix Corp or give up 13.17% of portfolio value over 90 days.

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

Enovix Corp  vs.  ESS Tech

Enovix Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enovix Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Enovix Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ESS Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESS Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ESS Tech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Enovix Corp and ESS Tech

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

The idea behind Enovix Corp and ESS Tech 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.