Correlation Between Trican Well and Ensign Energy

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

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

Diversification Opportunities for Trican Well and Ensign Energy

0.74

Correlation Coefficient

Trican Well  Ensign Energy

Poor diversification

The 3 months correlation between Trican and Ensign is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Trican Well Service 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 Trican Well 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 Trican Well Service 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 Trican Well i.e., Trican Well and Ensign Energy go up and down completely randomly.

Pair Corralation between Trican Well and Ensign Energy

Assuming the 90 days trading horizon Trican Well Service is expected to generate 0.57 times more return on investment than Ensign Energy. However, Trican Well Service is 1.75 times less risky than Ensign Energy. It trades about -0.05 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  498.00  in Trican Well Service on December 30, 2024 and sell it today you would lose (36.00) from holding Trican Well Service or give up 7.23% of portfolio value over 90 days.

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

Trican Well Service  vs.  Ensign Energy Services

Trican Well Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trican Well Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 Trican Well and Ensign Energy

The main advantage of trading using opposite Trican Well and Ensign Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trican Well 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 Trican Well Service 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.