Correlation Between Enersys and Asia Pacific

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

By analyzing existing cross correlation between Enersys and Asia Pacific Wire, you can compare the effects of market volatilities on Enersys and Asia Pacific 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 Asia Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enersys and Asia Pacific.

Diversification Opportunities for Enersys and Asia Pacific

0.53

Correlation Coefficient

Enersys  Asia Pacific

Very weak diversification

The 3 months correlation between Enersys and Asia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Enersys and Asia Pacific Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Wire 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 Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Wire has no effect on the direction of Enersys i.e., Enersys and Asia Pacific go up and down completely randomly.

Pair Corralation between Enersys and Asia Pacific

Considering the 90-day investment horizon Enersys is expected to generate 5.1 times less return on investment than Asia Pacific. But when comparing it to its historical volatility, Enersys is 2.65 times less risky than Asia Pacific. It trades about 0.03 of its potential returns per unit of risk. Asia Pacific Wire is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  139.00  in Asia Pacific Wire on December 28, 2024 and sell it today you would earn a total of  15.00  from holding Asia Pacific Wire or generate 10.79% return on investment over 90 days.

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

Enersys  vs.  Asia Pacific Wire

Enersys

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enersys are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Enersys is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Asia Pacific Wire

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pacific Wire are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Asia Pacific exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enersys and Asia Pacific

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

The idea behind Enersys and Asia Pacific Wire 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 Global Correlations module to find global opportunities by holding instruments from different markets.