Correlation Between Gates Industrial and Enerpac Tool

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

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

Diversification Opportunities for Gates Industrial and Enerpac Tool

0.92

Correlation Coefficient

Gates Industrial  Enerpac Tool

Almost no diversification

The 3 months correlation between Gates and Enerpac is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Gates Industrial and Enerpac Tool Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerpac Tool Group and Gates Industrial 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 Gates Industrial are associated (or correlated) with Enerpac Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerpac Tool Group has no effect on the direction of Gates Industrial i.e., Gates Industrial and Enerpac Tool go up and down completely randomly.

Pair Corralation between Gates Industrial and Enerpac Tool

Given the investment horizon of 90 days Gates Industrial is expected to generate 1.19 times more return on investment than Enerpac Tool. However, Gates Industrial is 1.19 times more volatile than Enerpac Tool Group. It trades about 0.13 of its potential returns per unit of risk. Enerpac Tool Group is currently generating about 0.14 per unit of risk. If you would invest  1,213  in Gates Industrial on September 14, 2024 and sell it today you would earn a total of  985.00  from holding Gates Industrial or generate 81.2% return on investment over 90 days.

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

Gates Industrial  vs.  Enerpac Tool Group

Gates Industrial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gates Industrial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Gates Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Enerpac Tool Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enerpac Tool Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enerpac Tool exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gates Industrial and Enerpac Tool

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

The idea behind Gates Industrial and Enerpac Tool Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.