Correlation Between Ensign Energy and Pason Systems

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

Diversification Opportunities for Ensign Energy and Pason Systems

0.67

Correlation Coefficient

Ensign Energy  Pason Systems

Poor diversification

The 3 months correlation between Ensign and Pason is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ensign Energy Services and Pason Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pason Systems 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 Pason Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pason Systems has no effect on the direction of Ensign Energy i.e., Ensign Energy and Pason Systems go up and down completely randomly.

Pair Corralation between Ensign Energy and Pason Systems

Assuming the 90 days trading horizon Ensign Energy is expected to generate 3.5 times less return on investment than Pason Systems. But when comparing it to its historical volatility, Ensign Energy Services is 1.12 times less risky than Pason Systems. It trades about 0.04 of its potential returns per unit of risk. Pason Systems is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,339  in Pason Systems on September 2, 2024 and sell it today you would earn a total of  78.00  from holding Pason Systems or generate 5.83% return on investment over 90 days.

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

Ensign Energy Services  vs.  Pason Systems

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.

Pason Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pason Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pason Systems 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 Pason Systems

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

The idea behind Ensign Energy Services and Pason Systems 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.