Correlation Between Acuity Brands and ADS TEC

Can any of the company-specific risk be diversified away by investing in both Acuity Brands and ADS TEC 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 Acuity Brands and ADS TEC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acuity Brands and ADS TEC ENERGY PLC, you can compare the effects of market volatilities on Acuity Brands and ADS TEC 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 Acuity Brands with a short position of ADS TEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acuity Brands and ADS TEC.

Diversification Opportunities for Acuity Brands and ADS TEC

0.72

Correlation Coefficient

Acuity Brands  ADS TEC

Poor diversification

The 3 months correlation between Acuity and ADS is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Acuity Brands and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY and Acuity Brands 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 Acuity Brands are associated (or correlated) with ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of Acuity Brands i.e., Acuity Brands and ADS TEC go up and down completely randomly.

Pair Corralation between Acuity Brands and ADS TEC

Considering the 90-day investment horizon Acuity Brands is expected to generate 75.23 times less return on investment than ADS TEC. But when comparing it to its historical volatility, Acuity Brands is 55.79 times less risky than ADS TEC. It trades about 0.07 of its potential returns per unit of risk. ADS TEC ENERGY PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  33.00  in ADS TEC ENERGY PLC on September 2, 2024 and sell it today you would earn a total of  309.00  from holding ADS TEC ENERGY PLC or generate 936.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.65%
Values	Daily Returns

Acuity Brands  vs.  ADS TEC ENERGY PLC

Acuity Brands

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Acuity Brands are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Acuity Brands demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ADS TEC ENERGY

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADS TEC ENERGY PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, ADS TEC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acuity Brands and ADS TEC

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

The idea behind Acuity Brands and ADS TEC ENERGY PLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.