Correlation Between Enpro Industries and CVD Equipment

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Can any of the company-specific risk be diversified away by investing in both Enpro Industries and CVD Equipment 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 Enpro Industries and CVD Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enpro Industries and CVD Equipment, you can compare the effects of market volatilities on Enpro Industries and CVD Equipment 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 Enpro Industries with a short position of CVD Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enpro Industries and CVD Equipment.

Diversification Opportunities for Enpro Industries and CVD Equipment

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Enpro and CVD is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Enpro Industries and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment and Enpro Industries 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 Enpro Industries are associated (or correlated) with CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of Enpro Industries i.e., Enpro Industries and CVD Equipment go up and down completely randomly.

Pair Corralation between Enpro Industries and CVD Equipment

Considering the 90-day investment horizon Enpro Industries is expected to generate 0.45 times more return on investment than CVD Equipment. However, Enpro Industries is 2.22 times less risky than CVD Equipment. It trades about 0.06 of its potential returns per unit of risk. CVD Equipment is currently generating about 0.0 per unit of risk. If you would invest  9,305  in Enpro Industries on July 13, 2024 and sell it today you would earn a total of  6,495  from holding Enpro Industries or generate 69.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Enpro Industries  vs.  CVD Equipment

 Performance 
       Timeline  
Enpro Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Enpro Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Enpro Industries is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
CVD Equipment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CVD Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in November 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Enpro Industries and CVD Equipment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enpro Industries and CVD Equipment

The main advantage of trading using opposite Enpro Industries and CVD Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enpro Industries position performs unexpectedly, CVD Equipment 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 CVD Equipment will offset losses from the drop in CVD Equipment's long position.
The idea behind Enpro Industries and CVD Equipment 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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