Correlation Between Encore Wire and Hollysys Automation
Can any of the company-specific risk be diversified away by investing in both Encore Wire and Hollysys Automation 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 Hollysys Automation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encore Wire and Hollysys Automation Technologies, you can compare the effects of market volatilities on Encore Wire and Hollysys Automation 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 Hollysys Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Wire and Hollysys Automation.
Diversification Opportunities for Encore Wire and Hollysys Automation
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Encore and Hollysys is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Encore Wire and Hollysys Automation Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollysys Automation 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 Hollysys Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollysys Automation has no effect on the direction of Encore Wire i.e., Encore Wire and Hollysys Automation go up and down completely randomly.
Pair Corralation between Encore Wire and Hollysys Automation
Given the investment horizon of 90 days Encore Wire is expected to generate 1.19 times more return on investment than Hollysys Automation. However, Encore Wire is 1.19 times more volatile than Hollysys Automation Technologies. It trades about 0.09 of its potential returns per unit of risk. Hollysys Automation Technologies is currently generating about 0.07 per unit of risk. If you would invest 13,964 in Encore Wire on August 27, 2024 and sell it today you would earn a total of 15,020 from holding Encore Wire or generate 107.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.11% |
| Values | Daily Returns |
Encore Wire vs. Hollysys Automation Technologi
Performance |
| Timeline |
| Encore Wire |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Hollysys Automation |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Encore Wire and Hollysys Automation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Wire and Hollysys Automation
The main advantage of trading using opposite Encore Wire and Hollysys Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Wire position performs unexpectedly, Hollysys Automation 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 Hollysys Automation will offset losses from the drop in Hollysys Automation's long position.| Encore Wire vs. Advanced Energy Industries | Encore Wire vs. Acuity Brands | Encore Wire vs. Enersys | Encore Wire vs. nVent Electric PLC |
| Hollysys Automation vs. Huazhu Group | Hollysys Automation vs. VNET Group DRC | Hollysys Automation vs. Noah 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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