Correlation Between Ensign and IDEXX Laboratories

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

By analyzing existing cross correlation between The Ensign Group and IDEXX Laboratories, you can compare the effects of market volatilities on Ensign and IDEXX Laboratories 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 with a short position of IDEXX Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign and IDEXX Laboratories.

Diversification Opportunities for Ensign and IDEXX Laboratories

0.68

Correlation Coefficient

Ensign  IDEXX Laboratories

Poor diversification

The 3 months correlation between Ensign and IDEXX is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories and Ensign 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 The Ensign Group are associated (or correlated) with IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Ensign i.e., Ensign and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between Ensign and IDEXX Laboratories

Given the investment horizon of 90 days Ensign is expected to generate 2.84 times less return on investment than IDEXX Laboratories. But when comparing it to its historical volatility, The Ensign Group is 2.19 times less risky than IDEXX Laboratories. It trades about 0.13 of its potential returns per unit of risk. IDEXX Laboratories is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  48,661  in IDEXX Laboratories on May 7, 2025 and sell it today you would earn a total of  19,617  from holding IDEXX Laboratories or generate 40.31% return on investment over 90 days.

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

The Ensign Group  vs.  IDEXX Laboratories

Ensign Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Ensign Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Ensign reported solid returns over the last few months and may actually be approaching a breakup point.

IDEXX Laboratories

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDEXX Laboratories are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, IDEXX Laboratories showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ensign and IDEXX Laboratories

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

The idea behind The Ensign Group and IDEXX Laboratories 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.