Correlation Between WiseTech Global and Enghouse Systems

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

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

Diversification Opportunities for WiseTech Global and Enghouse Systems

0.61

Correlation Coefficient

WiseTech Global  Enghouse Systems

Poor diversification

The 3 months correlation between WiseTech and Enghouse is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding WiseTech Global Limited and Enghouse Systems Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enghouse Systems and WiseTech Global 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 WiseTech Global Limited 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 WiseTech Global i.e., WiseTech Global and Enghouse Systems go up and down completely randomly.

Pair Corralation between WiseTech Global and Enghouse Systems

Assuming the 90 days horizon WiseTech Global Limited is expected to under-perform the Enghouse Systems. In addition to that, WiseTech Global is 1.75 times more volatile than Enghouse Systems Limited. It trades about -0.24 of its total potential returns per unit of risk. Enghouse Systems Limited is currently generating about -0.01 per unit of volatility. If you would invest  1,874  in Enghouse Systems Limited on December 22, 2024 and sell it today you would lose (29.00) from holding Enghouse Systems Limited or give up 1.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

WiseTech Global Limited  vs.  Enghouse Systems Limited

WiseTech Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days WiseTech Global Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Enghouse Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enghouse Systems Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Enghouse Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WiseTech Global and Enghouse Systems

The main advantage of trading using opposite WiseTech Global and Enghouse Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WiseTech Global 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 WiseTech Global Limited and Enghouse Systems Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.