Correlation Between Momentum Group and Enad Global

Can any of the company-specific risk be diversified away by investing in both Momentum Group and Enad Global 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 Momentum Group and Enad Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Momentum Group AB and Enad Global 7, you can compare the effects of market volatilities on Momentum Group and Enad Global 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 Momentum Group with a short position of Enad Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Momentum Group and Enad Global.

Diversification Opportunities for Momentum Group and Enad Global

0.47

Correlation Coefficient

Momentum Group  Enad Global

Very weak diversification

The 3 months correlation between Momentum and Enad is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Momentum Group AB and Enad Global 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enad Global 7 and Momentum Group 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 Momentum Group AB are associated (or correlated) with Enad Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enad Global 7 has no effect on the direction of Momentum Group i.e., Momentum Group and Enad Global go up and down completely randomly.

Pair Corralation between Momentum Group and Enad Global

Assuming the 90 days trading horizon Momentum Group is expected to generate 38.19 times less return on investment than Enad Global. But when comparing it to its historical volatility, Momentum Group AB is 1.15 times less risky than Enad Global. It trades about 0.01 of its potential returns per unit of risk. Enad Global 7 is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,300  in Enad Global 7 on September 23, 2024 and sell it today you would earn a total of  322.00  from holding Enad Global 7 or generate 24.77% return on investment over 90 days.

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

Momentum Group AB  vs.  Enad Global 7

Momentum Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Momentum Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Momentum Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Enad Global 7

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enad Global 7 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enad Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Momentum Group and Enad Global

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

The idea behind Momentum Group AB and Enad Global 7 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.