Correlation Between Advanced Energy and Acuity Brands
Can any of the company-specific risk be diversified away by investing in both Advanced Energy and Acuity Brands 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 Advanced Energy and Acuity Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Energy Industries and Acuity Brands, you can compare the effects of market volatilities on Advanced Energy and Acuity Brands 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 Advanced Energy with a short position of Acuity Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Acuity Brands.
Diversification Opportunities for Advanced Energy and Acuity Brands
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Advanced and Acuity is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and Advanced Energy 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 Advanced Energy Industries are associated (or correlated) with Acuity Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acuity Brands has no effect on the direction of Advanced Energy i.e., Advanced Energy and Acuity Brands go up and down completely randomly.
Pair Corralation between Advanced Energy and Acuity Brands
Given the investment horizon of 90 days Advanced Energy is expected to generate 1.25 times less return on investment than Acuity Brands. In addition to that, Advanced Energy is 1.57 times more volatile than Acuity Brands. It trades about 0.15 of its total potential returns per unit of risk. Acuity Brands is currently generating about 0.3 per unit of volatility. If you would invest 29,640 in Acuity Brands on August 24, 2024 and sell it today you would earn a total of 2,401 from holding Acuity Brands or generate 8.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Energy Industries vs. Acuity Brands
Performance |
| Timeline |
| Advanced Energy Indu |
| Acuity Brands |
Advanced Energy and Acuity Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Energy and Acuity Brands
The main advantage of trading using opposite Advanced Energy and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, Acuity Brands 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 Acuity Brands will offset losses from the drop in Acuity Brands' long position.| Advanced Energy vs. MKS Instruments | Advanced Energy vs. Axcelis Technologies | Advanced Energy vs. Entegris | Advanced Energy vs. Cohu Inc |
| Acuity Brands vs. Energizer Holdings | Acuity Brands vs. Espey Mfg Electronics | Acuity Brands vs. Preformed Line Products | Acuity Brands vs. nVent Electric PLC |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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