Correlation Between Ensign Energy and CES Energy

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

Diversification Opportunities for Ensign Energy and CES Energy

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ensign and CES is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ensign Energy Services and CES Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CES Energy Solutions and Ensign Energy 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 Ensign Energy Services are associated (or correlated) with CES Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CES Energy Solutions has no effect on the direction of Ensign Energy i.e., Ensign Energy and CES Energy go up and down completely randomly.

Pair Corralation between Ensign Energy and CES Energy

Assuming the 90 days trading horizon Ensign Energy is expected to generate 1.02 times less return on investment than CES Energy. But when comparing it to its historical volatility, Ensign Energy Services is 1.12 times less risky than CES Energy. It trades about 0.12 of its potential returns per unit of risk. CES Energy Solutions is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  806.00  in CES Energy Solutions on August 29, 2024 and sell it today you would earn a total of  140.00  from holding CES Energy Solutions or generate 17.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ensign Energy Services  vs.  CES Energy Solutions

 Performance 
       Timeline  
Ensign Energy Services 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ensign Energy Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Ensign Energy displayed solid returns over the last few months and may actually be approaching a breakup point.
CES Energy Solutions 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CES Energy Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CES Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Ensign Energy and CES Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ensign Energy and CES Energy

The main advantage of trading using opposite Ensign Energy and CES Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ensign Energy position performs unexpectedly, CES Energy 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 CES Energy will offset losses from the drop in CES Energy's long position.
The idea behind Ensign Energy Services and CES Energy Solutions 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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