Correlation Between Enerpac Tool and Xylem

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

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

Diversification Opportunities for Enerpac Tool and Xylem

0.3

Correlation Coefficient

Enerpac Tool  Xylem

Weak diversification

The 3 months correlation between Enerpac and Xylem is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Enerpac Tool Group and Xylem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xylem Inc and Enerpac Tool 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 Enerpac Tool Group are associated (or correlated) with Xylem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xylem Inc has no effect on the direction of Enerpac Tool i.e., Enerpac Tool and Xylem go up and down completely randomly.

Pair Corralation between Enerpac Tool and Xylem

Given the investment horizon of 90 days Enerpac Tool Group is expected to generate 1.33 times more return on investment than Xylem. However, Enerpac Tool is 1.33 times more volatile than Xylem Inc. It trades about 0.07 of its potential returns per unit of risk. Xylem Inc is currently generating about 0.03 per unit of risk. If you would invest  2,648  in Enerpac Tool Group on October 22, 2024 and sell it today you would earn a total of  1,780  from holding Enerpac Tool Group or generate 67.22% return on investment over 90 days.

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

Enerpac Tool Group  vs.  Xylem Inc

Enerpac Tool Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enerpac Tool Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Enerpac Tool is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Xylem Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xylem Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Enerpac Tool and Xylem

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

The idea behind Enerpac Tool Group and Xylem Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.