Correlation Between DXP Enterprises and Encore Wire
Can any of the company-specific risk be diversified away by investing in both DXP Enterprises and Encore Wire 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 DXP Enterprises and Encore Wire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXP Enterprises and Encore Wire, you can compare the effects of market volatilities on DXP Enterprises and Encore Wire 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 DXP Enterprises with a short position of Encore Wire. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXP Enterprises and Encore Wire.
Diversification Opportunities for DXP Enterprises and Encore Wire
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between DXP and Encore is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and Encore Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Wire and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with Encore Wire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Wire has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and Encore Wire go up and down completely randomly.
Pair Corralation between DXP Enterprises and Encore Wire
If you would invest 4,937 in DXP Enterprises on August 28, 2024 and sell it today you would earn a total of 2,353 from holding DXP Enterprises or generate 47.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
DXP Enterprises vs. Encore Wire
Performance |
| Timeline |
| DXP Enterprises |
| Encore Wire |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
DXP Enterprises and Encore Wire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DXP Enterprises and Encore Wire
The main advantage of trading using opposite DXP Enterprises and Encore Wire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXP Enterprises position performs unexpectedly, Encore Wire 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 Encore Wire will offset losses from the drop in Encore Wire's long position.| DXP Enterprises vs. Global Industrial Co | DXP Enterprises vs. WESCO International | DXP Enterprises vs. MSC Industrial Direct |
| Encore Wire vs. Advanced Energy Industries | Encore Wire vs. Acuity Brands | Encore Wire vs. Enersys | Encore Wire vs. nVent Electric PLC |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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