Correlation Between Encore Wire and Acuity Brands
Can any of the company-specific risk be diversified away by investing in both Encore Wire 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 Encore Wire and Acuity Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encore Wire and Acuity Brands, you can compare the effects of market volatilities on Encore Wire 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 Encore Wire with a short position of Acuity Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Wire and Acuity Brands.
Diversification Opportunities for Encore Wire and Acuity Brands
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Encore and Acuity is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Encore Wire and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands 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 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 Encore Wire i.e., Encore Wire and Acuity Brands go up and down completely randomly.
Pair Corralation between Encore Wire and Acuity Brands
If you would invest 30,602 in Acuity Brands on August 28, 2024 and sell it today you would earn a total of 2,377 from holding Acuity Brands or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Encore Wire vs. Acuity Brands
Performance |
| Timeline |
| Encore Wire |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Acuity Brands |
Encore Wire and Acuity Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Wire and Acuity Brands
The main advantage of trading using opposite Encore Wire and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Wire 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.| Encore Wire vs. Advanced Energy Industries | Encore Wire vs. Acuity Brands | Encore Wire vs. Enersys | Encore Wire vs. nVent Electric PLC |
| Acuity Brands vs. Bloom Energy Corp | Acuity Brands vs. Eos Energy Enterprises | Acuity Brands vs. Sunrise New Energy | Acuity Brands vs. GrafTech International |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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