Correlation Between Enersys and Advanced Energy

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

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

Diversification Opportunities for Enersys and Advanced Energy

0.0

Correlation Coefficient

Enersys  Advanced Energy

Pay attention - limited upside

The 3 months correlation between Enersys and Advanced is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Enersys and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu and Enersys 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 Enersys are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of Enersys i.e., Enersys and Advanced Energy go up and down completely randomly.

Pair Corralation between Enersys and Advanced Energy

Considering the 90-day investment horizon Enersys is expected to under-perform the Advanced Energy. But the stock apears to be less risky and, when comparing its historical volatility, Enersys is 1.29 times less risky than Advanced Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Advanced Energy Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,600  in Advanced Energy Industries on August 30, 2024 and sell it today you would earn a total of  857.00  from holding Advanced Energy Industries or generate 8.08% return on investment over 90 days.

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

Enersys  vs.  Advanced Energy Industries

Enersys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enersys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Enersys is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Advanced Energy Indu

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Advanced Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Enersys and Advanced Energy

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

The idea behind Enersys and Advanced Energy Industries 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.