Correlation Between NewJersey Resources and ENN Energy

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

Diversification Opportunities for NewJersey Resources and ENN Energy

NewJerseyENNDiversified AwayNewJerseyENNDiversified Away100%
0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between NewJersey and ENN is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NewJersey Resources and ENN Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENN Energy Holdings and NewJersey Resources 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 NewJersey Resources are associated (or correlated) with ENN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENN Energy Holdings has no effect on the direction of NewJersey Resources i.e., NewJersey Resources and ENN Energy go up and down completely randomly.

Pair Corralation between NewJersey Resources and ENN Energy

Considering the 90-day investment horizon NewJersey Resources is expected to generate 0.24 times more return on investment than ENN Energy. However, NewJersey Resources is 4.08 times less risky than ENN Energy. It trades about 0.01 of its potential returns per unit of risk. ENN Energy Holdings is currently generating about -0.03 per unit of risk. If you would invest  4,741  in NewJersey Resources on November 26, 2024 and sell it today you would earn a total of  20.00  from holding NewJersey Resources or generate 0.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy53.13%
ValuesDaily Returns

NewJersey Resources  vs.  ENN Energy Holdings

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 05101520
JavaScript chart by amCharts 3.21.15NJR XNGSF
       Timeline  
NewJersey Resources 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days NewJersey Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking indicators, NewJersey Resources is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb45464748495051
ENN Energy Holdings 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ENN Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanFebDecJanFeb6.46.66.877.27.47.67.8

NewJersey Resources and ENN Energy Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.21-3.16-2.1-1.040.01.042.113.174.23 0.050.100.150.20
JavaScript chart by amCharts 3.21.15NJR XNGSF
       Returns  

Pair Trading with NewJersey Resources and ENN Energy

The main advantage of trading using opposite NewJersey Resources and ENN Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NewJersey Resources position performs unexpectedly, ENN 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 ENN Energy will offset losses from the drop in ENN Energy's long position.
The idea behind NewJersey Resources and ENN Energy Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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