Correlation Between National Energy and Enerflex

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

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

Diversification Opportunities for National Energy and Enerflex

0.63

Correlation Coefficient

National Energy  Enerflex

Poor diversification

The 3 months correlation between National and Enerflex is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding National Energy Services and Enerflex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerflex and National 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 National Energy Services are associated (or correlated) with Enerflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerflex has no effect on the direction of National Energy i.e., National Energy and Enerflex go up and down completely randomly.

Pair Corralation between National Energy and Enerflex

Assuming the 90 days horizon National Energy Services is expected to generate 4.16 times more return on investment than Enerflex. However, National Energy is 4.16 times more volatile than Enerflex. It trades about 0.04 of its potential returns per unit of risk. Enerflex is currently generating about -0.16 per unit of risk. If you would invest  40.00  in National Energy Services on December 30, 2024 and sell it today you would lose (2.00) from holding National Energy Services or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

National Energy Services  vs.  Enerflex

National Energy Services

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Energy Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, National Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Enerflex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enerflex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with National Energy and Enerflex

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

The idea behind National Energy Services and Enerflex 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.