Correlation Between Analog Devices and Enersys
Can any of the company-specific risk be diversified away by investing in both Analog Devices and Enersys 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 Analog Devices and Enersys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and Enersys, you can compare the effects of market volatilities on Analog Devices and Enersys 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 Analog Devices with a short position of Enersys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Enersys.
Diversification Opportunities for Analog Devices and Enersys
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Analog and Enersys is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys and Analog Devices 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 Analog Devices are associated (or correlated) with Enersys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersys has no effect on the direction of Analog Devices i.e., Analog Devices and Enersys go up and down completely randomly.
Pair Corralation between Analog Devices and Enersys
Considering the 90-day investment horizon Analog Devices is expected to generate 0.95 times more return on investment than Enersys. However, Analog Devices is 1.06 times less risky than Enersys. It trades about 0.05 of its potential returns per unit of risk. Enersys is currently generating about 0.04 per unit of risk. If you would invest 16,035 in Analog Devices on August 28, 2024 and sell it today you would earn a total of 6,323 from holding Analog Devices or generate 39.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. Enersys
Performance |
| Timeline |
| Analog Devices |
| Enersys |
Analog Devices and Enersys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Enersys
The main advantage of trading using opposite Analog Devices and Enersys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, Enersys 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 Enersys will offset losses from the drop in Enersys' long position.The idea behind Analog Devices and Enersys 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.| Enersys vs. Advanced Energy Industries | Enersys vs. Hubbell | Enersys vs. Acuity Brands | Enersys vs. Kimball Electronics |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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