Correlation Between Preformed Line and Encore Wire
Can any of the company-specific risk be diversified away by investing in both Preformed Line and Encore Wire 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 Preformed Line and Encore Wire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Preformed Line Products and Encore Wire, you can compare the effects of market volatilities on Preformed Line and Encore Wire 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 Preformed Line with a short position of Encore Wire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preformed Line and Encore Wire.
Diversification Opportunities for Preformed Line and Encore Wire
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Preformed and Encore is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Preformed Line Products and Encore Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Wire and Preformed Line 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 Preformed Line Products are associated (or correlated) with Encore Wire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Wire has no effect on the direction of Preformed Line i.e., Preformed Line and Encore Wire go up and down completely randomly.
Pair Corralation between Preformed Line and Encore Wire
Given the investment horizon of 90 days Preformed Line is expected to generate 2.95 times less return on investment than Encore Wire. In addition to that, Preformed Line is 3.35 times more volatile than Encore Wire. It trades about 0.02 of its total potential returns per unit of risk. Encore Wire is currently generating about 0.22 per unit of volatility. If you would invest 27,787 in Encore Wire on August 24, 2024 and sell it today you would earn a total of 1,197 from holding Encore Wire or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 20.8% |
| Values | Daily Returns |
Preformed Line Products vs. Encore Wire
Performance |
| Timeline |
| Preformed Line Products |
| Encore Wire |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Preformed Line and Encore Wire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Preformed Line and Encore Wire
The main advantage of trading using opposite Preformed Line and Encore Wire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preformed Line position performs unexpectedly, Encore Wire 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 Encore Wire will offset losses from the drop in Encore Wire's long position.| Preformed Line vs. Kimball Electronics | Preformed Line vs. nVent Electric PLC | Preformed Line vs. Espey Mfg Electronics | Preformed Line vs. Hubbell |
| Encore Wire vs. Advanced Energy Industries | Encore Wire vs. Acuity Brands | Encore Wire vs. Enersys | Encore Wire 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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |