Correlation Between Advanced Energy and Preformed Line

Can any of the company-specific risk be diversified away by investing in both Advanced Energy and Preformed Line 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 Advanced Energy and Preformed Line into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Energy Industries and Preformed Line Products, you can compare the effects of market volatilities on Advanced Energy and Preformed Line 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 Advanced Energy with a short position of Preformed Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Preformed Line.

Diversification Opportunities for Advanced Energy and Preformed Line

0.74

Correlation Coefficient

Advanced Energy  Preformed Line

Poor diversification

The 3 months correlation between Advanced and Preformed is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and Preformed Line Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preformed Line Products and Advanced Energy 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 Advanced Energy Industries are associated (or correlated) with Preformed Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preformed Line Products has no effect on the direction of Advanced Energy i.e., Advanced Energy and Preformed Line go up and down completely randomly.

Pair Corralation between Advanced Energy and Preformed Line

Given the investment horizon of 90 days Advanced Energy Industries is expected to generate 1.21 times more return on investment than Preformed Line. However, Advanced Energy is 1.21 times more volatile than Preformed Line Products. It trades about 0.02 of its potential returns per unit of risk. Preformed Line Products is currently generating about -0.24 per unit of risk. If you would invest  11,243  in Advanced Energy Industries on September 22, 2024 and sell it today you would earn a total of  57.00  from holding Advanced Energy Industries or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Advanced Energy Industries  vs.  Preformed Line Products

Advanced Energy Indu

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Advanced Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Preformed Line Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Preformed Line Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Preformed Line is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Advanced Energy and Preformed Line

The main advantage of trading using opposite Advanced Energy and Preformed Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, Preformed Line 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 Preformed Line will offset losses from the drop in Preformed Line's long position.

The idea behind Advanced Energy Industries and Preformed Line Products pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.