Correlation Between Alphabet and Acuity Brands
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Acuity Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and Acuity Brands, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Acuity Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Acuity Brands.
Diversification Opportunities for Alphabet and Acuity Brands
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alphabet and Acuity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Acuity Brands go up and down completely randomly.
Pair Corralation between Alphabet and Acuity Brands
Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Acuity Brands. In addition to that, Alphabet is 1.43 times more volatile than Acuity Brands. It trades about -0.07 of its total potential returns per unit of risk. Acuity Brands is currently generating about 0.21 per unit of volatility. If you would invest 30,190 in Acuity Brands on August 31, 2024 and sell it today you would earn a total of 1,826 from holding Acuity Brands or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Acuity Brands
Performance |
| Timeline |
| Alphabet Class C |
| Acuity Brands |
Alphabet and Acuity Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Acuity Brands
The main advantage of trading using opposite Alphabet and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.The idea behind Alphabet Inc Class C and Acuity Brands 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.| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |