Correlation Between Elong Power and Acuity Brands

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

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

Diversification Opportunities for Elong Power and Acuity Brands

0.65

Correlation Coefficient

Elong Power  Acuity Brands

Poor diversification

The 3 months correlation between Elong and Acuity is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Elong Power Holding and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and Elong Power 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 Elong Power Holding are associated (or correlated) with Acuity Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acuity Brands has no effect on the direction of Elong Power i.e., Elong Power and Acuity Brands go up and down completely randomly.

Pair Corralation between Elong Power and Acuity Brands

Given the investment horizon of 90 days Elong Power Holding is expected to under-perform the Acuity Brands. In addition to that, Elong Power is 2.97 times more volatile than Acuity Brands. It trades about -0.16 of its total potential returns per unit of risk. Acuity Brands is currently generating about -0.08 per unit of volatility. If you would invest  30,285  in Acuity Brands on December 26, 2024 and sell it today you would lose (3,157) from holding Acuity Brands or give up 10.42% of portfolio value over 90 days.

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

Elong Power Holding  vs.  Acuity Brands

Elong Power Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elong Power Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Elong Power and Acuity Brands

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

The idea behind Elong Power Holding and Acuity Brands 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.