Correlation Between Ensign and Aesthetic Medical

Can any of the company-specific risk be diversified away by investing in both Ensign and Aesthetic Medical 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 Aesthetic Medical 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 Aesthetic Medical Intl, you can compare the effects of market volatilities on Ensign and Aesthetic Medical 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 Aesthetic Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign and Aesthetic Medical.

Diversification Opportunities for Ensign and Aesthetic Medical

-0.42

Correlation Coefficient

Ensign  Aesthetic Medical

Very good diversification

The 3 months correlation between Ensign and Aesthetic is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and Aesthetic Medical Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aesthetic Medical Intl 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 Aesthetic Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aesthetic Medical Intl has no effect on the direction of Ensign i.e., Ensign and Aesthetic Medical go up and down completely randomly.

Pair Corralation between Ensign and Aesthetic Medical

Given the investment horizon of 90 days The Ensign Group is expected to generate 0.25 times more return on investment than Aesthetic Medical. However, The Ensign Group is 4.06 times less risky than Aesthetic Medical. It trades about 0.06 of its potential returns per unit of risk. Aesthetic Medical Intl is currently generating about -0.01 per unit of risk. If you would invest  7,636  in The Ensign Group on January 27, 2024 and sell it today you would earn a total of  4,093  from holding The Ensign Group or generate 53.6% return on investment over 90 days.

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

The Ensign Group  vs.  Aesthetic Medical Intl

Ensign Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Ensign Group are ranked lower than 1 (%) 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.

Aesthetic Medical Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aesthetic Medical Intl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Aesthetic Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ensign and Aesthetic Medical

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

The idea behind The Ensign Group and Aesthetic Medical Intl 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.

Check out your portfolio center.

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.