Correlation Between Acuity Brands and GrafTech International

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

By analyzing existing cross correlation between Acuity Brands and GrafTech International, you can compare the effects of market volatilities on Acuity Brands and GrafTech International 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 GrafTech International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acuity Brands and GrafTech International.

Diversification Opportunities for Acuity Brands and GrafTech International

-0.13

Correlation Coefficient

Acuity Brands  GrafTech International

Good diversification

The 3 months correlation between Acuity and GrafTech is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Acuity Brands and GrafTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrafTech International 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 GrafTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrafTech International has no effect on the direction of Acuity Brands i.e., Acuity Brands and GrafTech International go up and down completely randomly.

Pair Corralation between Acuity Brands and GrafTech International

Considering the 90-day investment horizon Acuity Brands is expected to generate 0.26 times more return on investment than GrafTech International. However, Acuity Brands is 3.78 times less risky than GrafTech International. It trades about -0.03 of its potential returns per unit of risk. GrafTech International is currently generating about -0.12 per unit of risk. If you would invest  32,053  in Acuity Brands on November 28, 2024 and sell it today you would lose (1,025) from holding Acuity Brands or give up 3.2% of portfolio value over 90 days.

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

Acuity Brands  vs.  GrafTech International

Acuity Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acuity Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Acuity Brands is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

GrafTech International

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Acuity Brands and GrafTech International

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

The idea behind Acuity Brands and GrafTech International 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.