Correlation Between Expion360 and Acuity Brands

Can any of the company-specific risk be diversified away by investing in both Expion360 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 Expion360 and Acuity Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Expion360 and Acuity Brands, you can compare the effects of market volatilities on Expion360 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 Expion360 with a short position of Acuity Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expion360 and Acuity Brands.

Diversification Opportunities for Expion360 and Acuity Brands

-0.65

Correlation Coefficient

Expion360  Acuity Brands

Excellent diversification

The 3 months correlation between Expion360 and Acuity is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Expion360 and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and Expion360 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 Expion360 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 Expion360 i.e., Expion360 and Acuity Brands go up and down completely randomly.

Pair Corralation between Expion360 and Acuity Brands

Given the investment horizon of 90 days Expion360 is expected to under-perform the Acuity Brands. In addition to that, Expion360 is 6.5 times more volatile than Acuity Brands. It trades about -0.07 of its total potential returns per unit of risk. Acuity Brands is currently generating about 0.08 per unit of volatility. If you would invest  27,526  in Acuity Brands on September 28, 2024 and sell it today you would earn a total of  2,249  from holding Acuity Brands or generate 8.17% return on investment over 90 days.

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

Expion360  vs.  Acuity Brands

Expion360

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Expion360 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Acuity Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Acuity Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Acuity Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Expion360 and Acuity Brands

The main advantage of trading using opposite Expion360 and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expion360 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 Expion360 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.