Correlation Between NVent Electric and Acuity Brands
Can any of the company-specific risk be diversified away by investing in both NVent Electric 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 NVent Electric and Acuity Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nVent Electric PLC and Acuity Brands, you can compare the effects of market volatilities on NVent Electric 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 NVent Electric with a short position of Acuity Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVent Electric and Acuity Brands.
Diversification Opportunities for NVent Electric and Acuity Brands
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NVent and Acuity is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding nVent Electric PLC and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and NVent Electric 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 nVent Electric PLC 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 NVent Electric i.e., NVent Electric and Acuity Brands go up and down completely randomly.
Pair Corralation between NVent Electric and Acuity Brands
Considering the 90-day investment horizon NVent Electric is expected to generate 1.14 times less return on investment than Acuity Brands. In addition to that, NVent Electric is 2.81 times more volatile than Acuity Brands. It trades about 0.08 of its total potential returns per unit of risk. Acuity Brands is currently generating about 0.25 per unit of volatility. If you would invest 30,602 in Acuity Brands on August 27, 2024 and sell it today you would earn a total of 2,022 from holding Acuity Brands or generate 6.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
nVent Electric PLC vs. Acuity Brands
Performance |
| Timeline |
| nVent Electric PLC |
| Acuity Brands |
NVent Electric and Acuity Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVent Electric and Acuity Brands
The main advantage of trading using opposite NVent Electric and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVent Electric 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.| NVent Electric vs. Hubbell | NVent Electric vs. Advanced Energy Industries | NVent Electric vs. Vertiv Holdings Co | NVent Electric vs. Energizer Holdings |
| Acuity Brands vs. Bloom Energy Corp | Acuity Brands vs. Eos Energy Enterprises | Acuity Brands vs. Sunrise New Energy | Acuity Brands vs. Flux Power 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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