Correlation Between ESS Tech and Enovix Corp

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

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

Diversification Opportunities for ESS Tech and Enovix Corp

0.89

Correlation Coefficient

ESS Tech  Enovix Corp

Very poor diversification

The 3 months correlation between ESS and Enovix is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ESS Tech and Enovix Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enovix Corp and ESS Tech 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 ESS Tech are associated (or correlated) with Enovix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enovix Corp has no effect on the direction of ESS Tech i.e., ESS Tech and Enovix Corp go up and down completely randomly.

Pair Corralation between ESS Tech and Enovix Corp

Considering the 90-day investment horizon ESS Tech is expected to under-perform the Enovix Corp. In addition to that, ESS Tech is 1.41 times more volatile than Enovix Corp. It trades about -0.11 of its total potential returns per unit of risk. Enovix Corp is currently generating about -0.07 per unit of volatility. If you would invest  1,128  in Enovix Corp on December 27, 2024 and sell it today you would lose (314.00) from holding Enovix Corp or give up 27.84% of portfolio value over 90 days.

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

ESS Tech  vs.  Enovix Corp

ESS Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESS Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Enovix Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enovix Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ESS Tech and Enovix Corp

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

The idea behind ESS Tech and Enovix 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.