Correlation Between Acuity Brands and NVent Electric
Can any of the company-specific risk be diversified away by investing in both Acuity Brands and NVent Electric 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 Acuity Brands and NVent Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acuity Brands and nVent Electric PLC, you can compare the effects of market volatilities on Acuity Brands and NVent Electric 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 Acuity Brands with a short position of NVent Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acuity Brands and NVent Electric.
Diversification Opportunities for Acuity Brands and NVent Electric
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Acuity and NVent is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Acuity Brands and nVent Electric PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nVent Electric PLC and Acuity Brands 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 Acuity Brands are associated (or correlated) with NVent Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nVent Electric PLC has no effect on the direction of Acuity Brands i.e., Acuity Brands and NVent Electric go up and down completely randomly.
Pair Corralation between Acuity Brands and NVent Electric
Considering the 90-day investment horizon Acuity Brands is expected to generate 0.82 times more return on investment than NVent Electric. However, Acuity Brands is 1.22 times less risky than NVent Electric. It trades about 0.14 of its potential returns per unit of risk. nVent Electric PLC is currently generating about 0.08 per unit of risk. If you would invest 17,694 in Acuity Brands on August 24, 2024 and sell it today you would earn a total of 14,932 from holding Acuity Brands or generate 84.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Acuity Brands vs. nVent Electric PLC
Performance |
| Timeline |
| Acuity Brands |
| nVent Electric PLC |
Acuity Brands and NVent Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Acuity Brands and NVent Electric
The main advantage of trading using opposite Acuity Brands and NVent Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acuity Brands position performs unexpectedly, NVent Electric 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 NVent Electric will offset losses from the drop in NVent Electric's long position.| Acuity Brands vs. Energizer Holdings | Acuity Brands vs. Espey Mfg Electronics | Acuity Brands vs. Preformed Line Products | Acuity Brands vs. nVent Electric PLC |
| NVent Electric vs. Hubbell | NVent Electric vs. Advanced Energy Industries | NVent Electric vs. Vertiv Holdings Co | NVent Electric 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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