Correlation Between Ennis and Steelcase
Can any of the company-specific risk be diversified away by investing in both Ennis and Steelcase 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 Ennis and Steelcase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ennis Inc and Steelcase, you can compare the effects of market volatilities on Ennis and Steelcase 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 Ennis with a short position of Steelcase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ennis and Steelcase.
Diversification Opportunities for Ennis and Steelcase
Modest diversification
The 3 months correlation between Ennis and Steelcase is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ennis Inc and Steelcase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steelcase and Ennis 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 Ennis Inc are associated (or correlated) with Steelcase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steelcase has no effect on the direction of Ennis i.e., Ennis and Steelcase go up and down completely randomly.
Pair Corralation between Ennis and Steelcase
Considering the 90-day investment horizon Ennis is expected to generate 99.77 times less return on investment than Steelcase. But when comparing it to its historical volatility, Ennis Inc is 1.21 times less risky than Steelcase. It trades about 0.0 of its potential returns per unit of risk. Steelcase is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,247 in Steelcase on August 24, 2024 and sell it today you would earn a total of 57.00 from holding Steelcase or generate 4.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ennis Inc vs. Steelcase
Performance |
| Timeline |
| Ennis Inc |
| Steelcase |
Ennis and Steelcase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ennis and Steelcase
The main advantage of trading using opposite Ennis and Steelcase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ennis position performs unexpectedly, Steelcase 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 Steelcase will offset losses from the drop in Steelcase's long position.The idea behind Ennis Inc and Steelcase 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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