Correlation Between NVent Electric and Exro Technologies

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

By analyzing existing cross correlation between nVent Electric PLC and Exro Technologies, you can compare the effects of market volatilities on NVent Electric and Exro Technologies 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 NVent Electric with a short position of Exro Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVent Electric and Exro Technologies.

Diversification Opportunities for NVent Electric and Exro Technologies

0.81

Correlation Coefficient

NVent Electric  Exro Technologies

Very poor diversification

The 3 months correlation between NVent and Exro is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding nVent Electric PLC and Exro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exro Technologies and NVent Electric 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 nVent Electric PLC are associated (or correlated) with Exro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exro Technologies has no effect on the direction of NVent Electric i.e., NVent Electric and Exro Technologies go up and down completely randomly.

Pair Corralation between NVent Electric and Exro Technologies

Considering the 90-day investment horizon nVent Electric PLC is expected to generate 0.37 times more return on investment than Exro Technologies. However, nVent Electric PLC is 2.72 times less risky than Exro Technologies. It trades about 0.05 of its potential returns per unit of risk. Exro Technologies is currently generating about -0.08 per unit of risk. If you would invest  4,138  in nVent Electric PLC on December 2, 2024 and sell it today you would earn a total of  1,896  from holding nVent Electric PLC or generate 45.82% return on investment over 90 days.

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

nVent Electric PLC  vs.  Exro Technologies

nVent Electric PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days nVent Electric PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Exro Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exro Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVent Electric and Exro Technologies

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

The idea behind nVent Electric PLC and Exro Technologies 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.