Correlation Between Encore Wire and Advanced Energy
Can any of the company-specific risk be diversified away by investing in both Encore Wire 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 Encore Wire and Advanced Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encore Wire and Advanced Energy Industries, you can compare the effects of market volatilities on Encore Wire 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 Encore Wire with a short position of Advanced Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Wire and Advanced Energy.
Diversification Opportunities for Encore Wire and Advanced Energy
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Encore and Advanced is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Encore Wire 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 Encore Wire 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 Encore Wire 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 Encore Wire i.e., Encore Wire and Advanced Energy go up and down completely randomly.
Pair Corralation between Encore Wire and Advanced Energy
Given the investment horizon of 90 days Encore Wire is expected to generate 0.31 times more return on investment than Advanced Energy. However, Encore Wire is 3.22 times less risky than Advanced Energy. It trades about 0.22 of its potential returns per unit of risk. Advanced Energy Industries is currently generating about 0.03 per unit of risk. 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 | Insignificant |
| Accuracy | 20.8% |
| Values | Daily Returns |
Encore Wire vs. Advanced Energy Industries
Performance |
| Timeline |
| Encore Wire |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Advanced Energy Indu |
Encore Wire and Advanced Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Wire and Advanced Energy
The main advantage of trading using opposite Encore Wire and Advanced Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Wire 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.| Encore Wire vs. Advanced Energy Industries | Encore Wire vs. Acuity Brands | Encore Wire vs. Enersys | Encore Wire vs. nVent Electric PLC |
| 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 Stocks Directory module to find actively traded stocks across global markets.
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