Correlation Between Ensign Energy and Transcontinental

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

Diversification Opportunities for Ensign Energy and Transcontinental

-0.42

Correlation Coefficient

Ensign Energy  Transcontinental

Very good diversification

The 3 months correlation between Ensign and Transcontinental is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ensign Energy Services and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Ensign Energy i.e., Ensign Energy and Transcontinental go up and down completely randomly.

Pair Corralation between Ensign Energy and Transcontinental

Assuming the 90 days trading horizon Ensign Energy Services is expected to generate 1.92 times more return on investment than Transcontinental. However, Ensign Energy is 1.92 times more volatile than Transcontinental. It trades about 0.09 of its potential returns per unit of risk. Transcontinental is currently generating about 0.04 per unit of risk. If you would invest  261.00  in Ensign Energy Services on October 4, 2024 and sell it today you would earn a total of  37.00  from holding Ensign Energy Services or generate 14.18% 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.  Transcontinental

Ensign Energy Services

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ensign Energy Services are ranked lower than 7 (%) 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.

Transcontinental

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Transcontinental is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ensign Energy and Transcontinental

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

The idea behind Ensign Energy Services and Transcontinental 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .