Correlation Between Enservco and Bri-Chem Corp

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

By analyzing existing cross correlation between Enservco Co and Bri Chem Corp, you can compare the effects of market volatilities on Enservco and Bri-Chem Corp 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 Enservco with a short position of Bri-Chem Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enservco and Bri-Chem Corp.

Diversification Opportunities for Enservco and Bri-Chem Corp

-0.43

Correlation Coefficient

Enservco  Bri-Chem Corp

Very good diversification

The 3 months correlation between Enservco and Bri-Chem is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Enservco Co and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp and Enservco 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 Enservco Co are associated (or correlated) with Bri-Chem Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of Enservco i.e., Enservco and Bri-Chem Corp go up and down completely randomly.

Pair Corralation between Enservco and Bri-Chem Corp

Given the investment horizon of 90 days Enservco is expected to generate 105.72 times less return on investment than Bri-Chem Corp. But when comparing it to its historical volatility, Enservco Co is 9.11 times less risky than Bri-Chem Corp. It trades about 0.0 of its potential returns per unit of risk. Bri Chem Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Bri Chem Corp on March 8, 2024 and sell it today you would lose (29.00) from holding Bri Chem Corp or give up 69.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.04%
Values	Daily Returns

Enservco Co  vs.  Bri Chem Corp

Enservco

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enservco Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Enservco showed solid returns over the last few months and may actually be approaching a breakup point.

Bri Chem Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bri Chem Corp 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 and fundamental indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Enservco and Bri-Chem Corp

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

The idea behind Enservco Co and Bri Chem 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.