Correlation Between Enghouse Systems and Redishred Capital

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

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

Diversification Opportunities for Enghouse Systems and Redishred Capital

0.52

Correlation Coefficient

Enghouse Systems  Redishred Capital

Very weak diversification

The 3 months correlation between Enghouse and Redishred is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Enghouse Systems and Redishred Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redishred Capital Corp and Enghouse Systems 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 Enghouse Systems are associated (or correlated) with Redishred Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redishred Capital Corp has no effect on the direction of Enghouse Systems i.e., Enghouse Systems and Redishred Capital go up and down completely randomly.

Pair Corralation between Enghouse Systems and Redishred Capital

Assuming the 90 days trading horizon Enghouse Systems is expected to generate 0.63 times more return on investment than Redishred Capital. However, Enghouse Systems is 1.59 times less risky than Redishred Capital. It trades about 0.03 of its potential returns per unit of risk. Redishred Capital Corp is currently generating about -0.07 per unit of risk. If you would invest  2,996  in Enghouse Systems on February 10, 2024 and sell it today you would earn a total of  17.00  from holding Enghouse Systems or generate 0.57% return on investment over 90 days.

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

Enghouse Systems  vs.  Redishred Capital Corp

Enghouse Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enghouse Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Redishred Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Enghouse Systems and Redishred Capital

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

The idea behind Enghouse Systems and Redishred Capital Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.