Correlation Between SPDR SP and Ensign

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

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

Diversification Opportunities for SPDR SP and Ensign

0.58

Correlation Coefficient

SPDR SP  Ensign

Very weak diversification

The 3 months correlation between SPDR and Ensign is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Semiconductor and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group and SPDR SP 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 SPDR SP Semiconductor are associated (or correlated) with Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of SPDR SP i.e., SPDR SP and Ensign go up and down completely randomly.

Pair Corralation between SPDR SP and Ensign

Considering the 90-day investment horizon SPDR SP Semiconductor is expected to generate 1.57 times more return on investment than Ensign. However, SPDR SP is 1.57 times more volatile than The Ensign Group. It trades about -0.03 of its potential returns per unit of risk. The Ensign Group is currently generating about -0.06 per unit of risk. If you would invest  21,810  in SPDR SP Semiconductor on January 19, 2024 and sell it today you would lose (366.00) from holding SPDR SP Semiconductor or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

SPDR SP Semiconductor  vs.  The Ensign Group

SPDR SP Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ensign Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Ensign Group are ranked lower than 3 (%) 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.

Pair Trading with SPDR SP and Ensign

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

The idea behind SPDR SP Semiconductor and The Ensign Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.