Correlation Between Enhanced and Value Line

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

By analyzing existing cross correlation between Enhanced Large Pany and Value Line Larger, you can compare the effects of market volatilities on Enhanced and Value Line 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 Enhanced with a short position of Value Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced and Value Line.

Diversification Opportunities for Enhanced and Value Line

0.95

Correlation Coefficient

Enhanced  Value Line

Almost no diversification

The 3 months correlation between Enhanced and Value is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and Value Line Larger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Larger and Enhanced 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 Enhanced Large Pany are associated (or correlated) with Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Larger has no effect on the direction of Enhanced i.e., Enhanced and Value Line go up and down completely randomly.

Pair Corralation between Enhanced and Value Line

Assuming the 90 days horizon Enhanced is expected to generate 1.41 times less return on investment than Value Line. But when comparing it to its historical volatility, Enhanced Large Pany is 1.63 times less risky than Value Line. It trades about 0.2 of its potential returns per unit of risk. Value Line Larger is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,089  in Value Line Larger on May 18, 2025 and sell it today you would earn a total of  499.00  from holding Value Line Larger or generate 12.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Enhanced Large Pany  vs.  Value Line Larger

Enhanced Large Pany

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enhanced Large Pany are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Enhanced may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Value Line Larger

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Value Line Larger are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Value Line may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Enhanced and Value Line

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

The idea behind Enhanced Large Pany and Value Line Larger 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 Global Correlations module to find global opportunities by holding instruments from different markets.