Correlation Between Royal Helium and Ensign Energy

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

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

Diversification Opportunities for Royal Helium and Ensign Energy

-0.54

Correlation Coefficient

Royal Helium  Ensign Energy

Excellent diversification

The 3 months correlation between Royal and Ensign is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Royal Helium and Ensign Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Energy Services and Royal Helium 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 Royal Helium are associated (or correlated) with Ensign Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Energy Services has no effect on the direction of Royal Helium i.e., Royal Helium and Ensign Energy go up and down completely randomly.

Pair Corralation between Royal Helium and Ensign Energy

Assuming the 90 days horizon Royal Helium is expected to generate 83.45 times more return on investment than Ensign Energy. However, Royal Helium is 83.45 times more volatile than Ensign Energy Services. It trades about 0.26 of its potential returns per unit of risk. Ensign Energy Services is currently generating about -0.09 per unit of risk. If you would invest  2.50  in Royal Helium on December 29, 2024 and sell it today you would earn a total of  3,458  from holding Royal Helium or generate 138300.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Royal Helium  vs.  Ensign Energy Services

Royal Helium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Helium are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royal Helium showed solid returns over the last few months and may actually be approaching a breakup point.

Ensign Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ensign Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Royal Helium and Ensign Energy

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

The idea behind Royal Helium and Ensign Energy Services 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.