Correlation Between Enersys and Alliance Recovery

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

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

Diversification Opportunities for Enersys and Alliance Recovery

0.1

Correlation Coefficient

Enersys  Alliance Recovery

Average diversification

The 3 months correlation between Enersys and Alliance is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Enersys and Alliance Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Recovery 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 Alliance Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Recovery has no effect on the direction of Enersys i.e., Enersys and Alliance Recovery go up and down completely randomly.

Pair Corralation between Enersys and Alliance Recovery

Considering the 90-day investment horizon Enersys is expected to generate 0.43 times more return on investment than Alliance Recovery. However, Enersys is 2.34 times less risky than Alliance Recovery. It trades about -0.01 of its potential returns per unit of risk. Alliance Recovery is currently generating about -0.01 per unit of risk. If you would invest  9,802  in Enersys on September 5, 2024 and sell it today you would lose (154.00) from holding Enersys or give up 1.57% of portfolio value over 90 days.

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

Enersys  vs.  Alliance Recovery

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.

Alliance Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Alliance Recovery is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enersys and Alliance Recovery

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

The idea behind Enersys and Alliance Recovery 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.