Correlation Between Advanced Energy and Preformed Line
Can any of the company-specific risk be diversified away by investing in both Advanced Energy and Preformed 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 Advanced Energy and Preformed Line 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 Preformed Line Products, you can compare the effects of market volatilities on Advanced Energy and Preformed 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 Advanced Energy with a short position of Preformed Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Preformed Line.
Diversification Opportunities for Advanced Energy and Preformed Line
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Advanced and Preformed is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and Preformed Line Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preformed Line Products 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 Preformed Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preformed Line Products has no effect on the direction of Advanced Energy i.e., Advanced Energy and Preformed Line go up and down completely randomly.
Pair Corralation between Advanced Energy and Preformed Line
Given the investment horizon of 90 days Advanced Energy is expected to generate 1.63 times less return on investment than Preformed Line. But when comparing it to its historical volatility, Advanced Energy Industries is 1.05 times less risky than Preformed Line. It trades about 0.03 of its potential returns per unit of risk. Preformed Line Products is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 11,947 in Preformed Line Products on November 9, 2024 and sell it today you would earn a total of 2,681 from holding Preformed Line Products or generate 22.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Energy Industries vs. Preformed Line Products
Performance |
| Timeline |
| Advanced Energy Indu |
| Preformed Line Products |
Advanced Energy and Preformed Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Energy and Preformed Line
The main advantage of trading using opposite Advanced Energy and Preformed Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, Preformed 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 Preformed Line will offset losses from the drop in Preformed Line's long position.| Advanced Energy vs. MKS Instruments | Advanced Energy vs. Axcelis Technologies | Advanced Energy vs. Entegris | Advanced Energy vs. Cohu Inc |
| Preformed Line vs. Kimball Electronics | Preformed Line vs. nVent Electric PLC | Preformed Line vs. Espey Mfg Electronics | Preformed Line vs. Hubbell |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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