Correlation Between Edgewater Wireless and Enghouse Systems

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

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

Diversification Opportunities for Edgewater Wireless and Enghouse Systems

0.17

Correlation Coefficient

Edgewater Wireless  Enghouse Systems

Average diversification

The 3 months correlation between Edgewater and Enghouse is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Edgewater Wireless Systems and Enghouse Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enghouse Systems and Edgewater Wireless 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 Edgewater Wireless Systems 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 Edgewater Wireless i.e., Edgewater Wireless and Enghouse Systems go up and down completely randomly.

Pair Corralation between Edgewater Wireless and Enghouse Systems

Assuming the 90 days horizon Edgewater Wireless Systems is expected to generate 7.56 times more return on investment than Enghouse Systems. However, Edgewater Wireless is 7.56 times more volatile than Enghouse Systems. It trades about 0.07 of its potential returns per unit of risk. Enghouse Systems is currently generating about 0.03 per unit of risk. If you would invest  4.00  in Edgewater Wireless Systems on September 12, 2024 and sell it today you would earn a total of  0.50  from holding Edgewater Wireless Systems or generate 12.5% return on investment over 90 days.

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

Edgewater Wireless Systems  vs.  Enghouse Systems

Edgewater Wireless

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewater Wireless Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Edgewater Wireless showed solid returns over the last few months and may actually be approaching a breakup point.

Enghouse Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enghouse Systems are ranked lower than 2 (%) 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 Edgewater Wireless and Enghouse Systems

The main advantage of trading using opposite Edgewater Wireless and Enghouse Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgewater Wireless 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 Edgewater Wireless Systems 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.