Correlation Between Apogee Enterprises and NET Power

Can any of the company-specific risk be diversified away by investing in both Apogee Enterprises and NET Power 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 Apogee Enterprises and NET Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apogee Enterprises and NET Power, you can compare the effects of market volatilities on Apogee Enterprises and NET Power 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 Apogee Enterprises with a short position of NET Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apogee Enterprises and NET Power.

Diversification Opportunities for Apogee Enterprises and NET Power

0.42

Correlation Coefficient

Apogee Enterprises  NET Power

Very weak diversification

The 3 months correlation between Apogee and NET is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Apogee Enterprises and NET Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NET Power and Apogee Enterprises 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 Apogee Enterprises are associated (or correlated) with NET Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NET Power has no effect on the direction of Apogee Enterprises i.e., Apogee Enterprises and NET Power go up and down completely randomly.

Pair Corralation between Apogee Enterprises and NET Power

Given the investment horizon of 90 days Apogee Enterprises is expected to generate 0.62 times more return on investment than NET Power. However, Apogee Enterprises is 1.62 times less risky than NET Power. It trades about 0.04 of its potential returns per unit of risk. NET Power is currently generating about 0.02 per unit of risk. If you would invest  4,180  in Apogee Enterprises on October 10, 2024 and sell it today you would earn a total of  1,580  from holding Apogee Enterprises or generate 37.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Apogee Enterprises  vs.  NET Power

Apogee Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apogee Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NET Power

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NET Power are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, NET Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apogee Enterprises and NET Power

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

The idea behind Apogee Enterprises and NET Power 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.