Correlation Between Energizer Holdings and NVent Electric

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Can any of the company-specific risk be diversified away by investing in both Energizer Holdings 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 Energizer Holdings and NVent Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energizer Holdings and nVent Electric PLC, you can compare the effects of market volatilities on Energizer Holdings 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 Energizer Holdings with a short position of NVent Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energizer Holdings and NVent Electric.

Diversification Opportunities for Energizer Holdings and NVent Electric

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Energizer and NVent is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Energizer Holdings 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 Energizer Holdings 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 Energizer Holdings 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 Energizer Holdings i.e., Energizer Holdings and NVent Electric go up and down completely randomly.

Pair Corralation between Energizer Holdings and NVent Electric

Considering the 90-day investment horizon Energizer Holdings is expected to generate 0.36 times more return on investment than NVent Electric. However, Energizer Holdings is 2.81 times less risky than NVent Electric. It trades about -0.06 of its potential returns per unit of risk. nVent Electric PLC is currently generating about -0.04 per unit of risk. If you would invest  3,461  in Energizer Holdings on November 3, 2024 and sell it today you would lose (62.00) from holding Energizer Holdings or give up 1.79% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Energizer Holdings  vs.  nVent Electric PLC

 Performance 
       Timeline  
Energizer Holdings 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Energizer Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Energizer Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
nVent Electric PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days nVent Electric PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NVent Electric is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Energizer Holdings and NVent Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Energizer Holdings and NVent Electric

The main advantage of trading using opposite Energizer Holdings and NVent Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energizer Holdings 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.
The idea behind Energizer Holdings and nVent Electric PLC 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.
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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