Correlation Between Enersys and CBAK Energy

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

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

Diversification Opportunities for Enersys and CBAK Energy

0.73

Correlation Coefficient

Enersys  CBAK Energy

Poor diversification

The 3 months correlation between Enersys and CBAK is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Enersys and CBAK Energy Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBAK Energy Technology 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 CBAK Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBAK Energy Technology has no effect on the direction of Enersys i.e., Enersys and CBAK Energy go up and down completely randomly.

Pair Corralation between Enersys and CBAK Energy

Considering the 90-day investment horizon Enersys is expected to under-perform the CBAK Energy. But the stock apears to be less risky and, when comparing its historical volatility, Enersys is 4.71 times less risky than CBAK Energy. The stock trades about -0.04 of its potential returns per unit of risk. The CBAK Energy Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  94.00  in CBAK Energy Technology on October 6, 2024 and sell it today you would earn a total of  4.00  from holding CBAK Energy Technology or generate 4.26% return on investment over 90 days.

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

Enersys  vs.  CBAK Energy Technology

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

CBAK Energy Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBAK Energy Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Enersys and CBAK Energy

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

The idea behind Enersys and CBAK Energy Technology 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.