Correlation Between Ensign Energy and Acadian Timber

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

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

Diversification Opportunities for Ensign Energy and Acadian Timber

-0.46

Correlation Coefficient

Ensign Energy  Acadian Timber

Very good diversification

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

Pair Corralation between Ensign Energy and Acadian Timber

Assuming the 90 days trading horizon Ensign Energy Services is expected to generate 3.04 times more return on investment than Acadian Timber. However, Ensign Energy is 3.04 times more volatile than Acadian Timber Corp. It trades about 0.14 of its potential returns per unit of risk. Acadian Timber Corp is currently generating about -0.07 per unit of risk. If you would invest  275.00  in Ensign Energy Services on October 26, 2024 and sell it today you would earn a total of  63.00  from holding Ensign Energy Services or generate 22.91% return on investment over 90 days.

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

Ensign Energy Services  vs.  Acadian Timber Corp

Ensign Energy Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ensign Energy Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Ensign Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Acadian Timber Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acadian Timber Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Acadian Timber is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ensign Energy and Acadian Timber

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

The idea behind Ensign Energy Services and Acadian Timber Corp 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.