Correlation Between K Bro and Enghouse Systems

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

By analyzing existing cross correlation between K Bro Linen and Enghouse Systems, you can compare the effects of market volatilities on K Bro and Enghouse Systems 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 K Bro with a short position of Enghouse Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Bro and Enghouse Systems.

Diversification Opportunities for K Bro and Enghouse Systems

-0.03

Correlation Coefficient

K Bro  Enghouse Systems

Good diversification

The 3 months correlation between KBL and Enghouse is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding K Bro Linen and Enghouse Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enghouse Systems and K Bro 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 K Bro Linen are associated (or correlated) with Enghouse Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enghouse Systems has no effect on the direction of K Bro i.e., K Bro and Enghouse Systems go up and down completely randomly.

Pair Corralation between K Bro and Enghouse Systems

Assuming the 90 days trading horizon K Bro Linen is expected to generate 0.73 times more return on investment than Enghouse Systems. However, K Bro Linen is 1.37 times less risky than Enghouse Systems. It trades about -0.01 of its potential returns per unit of risk. Enghouse Systems is currently generating about -0.02 per unit of risk. If you would invest  3,520  in K Bro Linen on April 24, 2025 and sell it today you would lose (39.00) from holding K Bro Linen or give up 1.11% of portfolio value over 90 days.

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

K Bro Linen  vs.  Enghouse Systems

K Bro Linen

Risk-Adjusted Performance

Very Weak

Over the last 90 days K Bro Linen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, K Bro is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Enghouse Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enghouse Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Enghouse Systems is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with K Bro and Enghouse Systems

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

The idea behind K Bro Linen and Enghouse Systems 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.