Correlation Between Topicus and Enghouse Systems

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

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

Diversification Opportunities for Topicus and Enghouse Systems

0.37

Correlation Coefficient

Topicus  Enghouse Systems

Weak diversification

The 3 months correlation between Topicus and Enghouse is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Topicus and Enghouse Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enghouse Systems and Topicus 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 Topicus are associated (or correlated) with Enghouse Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enghouse Systems has no effect on the direction of Topicus i.e., Topicus and Enghouse Systems go up and down completely randomly.

Pair Corralation between Topicus and Enghouse Systems

Assuming the 90 days horizon Topicus is expected to under-perform the Enghouse Systems. But the stock apears to be less risky and, when comparing its historical volatility, Topicus is 1.07 times less risky than Enghouse Systems. The stock trades about -0.04 of its potential returns per unit of risk. The Enghouse Systems is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,870  in Enghouse Systems on September 4, 2024 and sell it today you would earn a total of  47.00  from holding Enghouse Systems or generate 1.64% return on investment over 90 days.

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

Topicus  vs.  Enghouse Systems

Topicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Topicus is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Enghouse Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enghouse Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Enghouse Systems is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Topicus and Enghouse Systems

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

The idea behind Topicus and Enghouse Systems 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.