Correlation Between Vertiv Holdings and Advanced Energy
Can any of the company-specific risk be diversified away by investing in both Vertiv Holdings and Advanced Energy 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 Vertiv Holdings and Advanced Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vertiv Holdings Co and Advanced Energy Industries, you can compare the effects of market volatilities on Vertiv Holdings and Advanced Energy 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 Vertiv Holdings with a short position of Advanced Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertiv Holdings and Advanced Energy.
Diversification Opportunities for Vertiv Holdings and Advanced Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vertiv and Advanced is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vertiv Holdings Co and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu and Vertiv 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 Vertiv Holdings Co are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of Vertiv Holdings i.e., Vertiv Holdings and Advanced Energy go up and down completely randomly.
Pair Corralation between Vertiv Holdings and Advanced Energy
Considering the 90-day investment horizon Vertiv Holdings Co is expected to generate 2.45 times more return on investment than Advanced Energy. However, Vertiv Holdings is 2.45 times more volatile than Advanced Energy Industries. It trades about 0.04 of its potential returns per unit of risk. Advanced Energy Industries is currently generating about 0.01 per unit of risk. If you would invest 11,830 in Vertiv Holdings Co on November 3, 2024 and sell it today you would lose (128.00) from holding Vertiv Holdings Co or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vertiv Holdings Co vs. Advanced Energy Industries
Performance |
| Timeline |
| Vertiv Holdings |
| Advanced Energy Indu |
Vertiv Holdings and Advanced Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vertiv Holdings and Advanced Energy
The main advantage of trading using opposite Vertiv Holdings and Advanced Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertiv Holdings position performs unexpectedly, Advanced Energy 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 Advanced Energy will offset losses from the drop in Advanced Energy's long position.| Vertiv Holdings vs. nVent Electric PLC | Vertiv Holdings vs. Hubbell | Vertiv Holdings vs. Advanced Energy Industries | Vertiv Holdings vs. Energizer Holdings |
| Advanced Energy vs. MKS Instruments | Advanced Energy vs. Axcelis Technologies | Advanced Energy vs. Entegris | Advanced Energy vs. Cohu Inc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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