Correlation Between Enersys and Acuity Brands

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

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

Diversification Opportunities for Enersys and Acuity Brands

-0.06

Correlation Coefficient

Enersys  Acuity Brands

Good diversification

The 3 months correlation between Enersys and Acuity is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Enersys and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands 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 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 Enersys i.e., Enersys and Acuity Brands go up and down completely randomly.

Pair Corralation between Enersys and Acuity Brands

Considering the 90-day investment horizon Enersys is expected to under-perform the Acuity Brands. But the stock apears to be less risky and, when comparing its historical volatility, Enersys is 1.1 times less risky than Acuity Brands. The stock trades about -0.04 of its potential returns per unit of risk. The Acuity Brands is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  25,458  in Acuity Brands on August 30, 2024 and sell it today you would earn a total of  6,558  from holding Acuity Brands or generate 25.76% return on investment over 90 days.

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

Enersys  vs.  Acuity Brands

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.

Acuity Brands

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Acuity Brands are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Acuity Brands demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enersys and Acuity Brands

The main advantage of trading using opposite Enersys and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enersys 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 Enersys 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.