Correlation Between Enovix Corp and Arkema SA

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

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

Diversification Opportunities for Enovix Corp and Arkema SA

0.27

Correlation Coefficient

Enovix Corp  Arkema SA

Modest diversification

The 3 months correlation between Enovix and Arkema is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Enovix Corp and Arkema SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA ADR and Enovix Corp 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 Enovix Corp are associated (or correlated) with Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA ADR has no effect on the direction of Enovix Corp i.e., Enovix Corp and Arkema SA go up and down completely randomly.

Pair Corralation between Enovix Corp and Arkema SA

Given the investment horizon of 90 days Enovix Corp is expected to under-perform the Arkema SA. In addition to that, Enovix Corp is 2.77 times more volatile than Arkema SA ADR. It trades about -0.36 of its total potential returns per unit of risk. Arkema SA ADR is currently generating about -0.02 per unit of volatility. If you would invest  10,220  in Arkema SA ADR on January 20, 2024 and sell it today you would lose (74.00) from holding Arkema SA ADR or give up 0.72% of portfolio value over 90 days.

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

Enovix Corp  vs.  Arkema SA ADR

Enovix Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enovix Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Arkema SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arkema SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Arkema SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enovix Corp and Arkema SA

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

The idea behind Enovix Corp and Arkema SA ADR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.