Correlation Between Advanced Energy and Vertiv Holdings
Can any of the company-specific risk be diversified away by investing in both Advanced Energy and Vertiv Holdings 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 Vertiv Holdings 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 Vertiv Holdings Co, you can compare the effects of market volatilities on Advanced Energy and Vertiv Holdings 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 Vertiv Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Vertiv Holdings.
Diversification Opportunities for Advanced Energy and Vertiv Holdings
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Advanced and Vertiv is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and Vertiv Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertiv Holdings 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 Vertiv Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertiv Holdings has no effect on the direction of Advanced Energy i.e., Advanced Energy and Vertiv Holdings go up and down completely randomly.
Pair Corralation between Advanced Energy and Vertiv Holdings
Given the investment horizon of 90 days Advanced Energy is expected to generate 6.45 times less return on investment than Vertiv Holdings. But when comparing it to its historical volatility, Advanced Energy Industries is 1.58 times less risky than Vertiv Holdings. It trades about 0.04 of its potential returns per unit of risk. Vertiv Holdings Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,219 in Vertiv Holdings Co on August 24, 2024 and sell it today you would earn a total of 9,930 from holding Vertiv Holdings Co or generate 235.36% 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. Vertiv Holdings Co
Performance |
| Timeline |
| Advanced Energy Indu |
| Vertiv Holdings |
Advanced Energy and Vertiv Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Energy and Vertiv Holdings
The main advantage of trading using opposite Advanced Energy and Vertiv Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, Vertiv Holdings 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 Vertiv Holdings will offset losses from the drop in Vertiv Holdings' long position.| Advanced Energy vs. MKS Instruments | Advanced Energy vs. Axcelis Technologies | Advanced Energy vs. Entegris | Advanced Energy vs. Cohu Inc |
| Vertiv Holdings vs. nVent Electric PLC | Vertiv Holdings vs. Hubbell | Vertiv Holdings vs. Advanced Energy Industries | Vertiv Holdings vs. Energizer Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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