Correlation Between Ensign and Laboratory

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

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

Diversification Opportunities for Ensign and Laboratory

0.02

Correlation Coefficient

Ensign  Laboratory

Significant diversification

The 3 months correlation between Ensign and Laboratory is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and Laboratory of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory and Ensign 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 The Ensign Group are associated (or correlated) with Laboratory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratory has no effect on the direction of Ensign i.e., Ensign and Laboratory go up and down completely randomly.

Pair Corralation between Ensign and Laboratory

Given the investment horizon of 90 days The Ensign Group is expected to generate 0.82 times more return on investment than Laboratory. However, The Ensign Group is 1.22 times less risky than Laboratory. It trades about -0.16 of its potential returns per unit of risk. Laboratory of is currently generating about -0.18 per unit of risk. If you would invest  12,387  in The Ensign Group on January 31, 2024 and sell it today you would lose (518.00) from holding The Ensign Group or give up 4.18% of portfolio value over 90 days.

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

The Ensign Group  vs.  Laboratory of

Ensign Group

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Ensign Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ensign is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Laboratory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laboratory of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Ensign and Laboratory

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

The idea behind The Ensign Group and Laboratory of 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.