Correlation Between Zurn Elkay and Energy Recovery

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

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

Diversification Opportunities for Zurn Elkay and Energy Recovery

-0.79

Correlation Coefficient

Zurn Elkay  Energy Recovery

Pay attention - limited upside

The 3 months correlation between Zurn and Energy is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Zurn Elkay Water and Energy Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Recovery and Zurn Elkay 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 Zurn Elkay Water are associated (or correlated) with Energy Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Recovery has no effect on the direction of Zurn Elkay i.e., Zurn Elkay and Energy Recovery go up and down completely randomly.

Pair Corralation between Zurn Elkay and Energy Recovery

Considering the 90-day investment horizon Zurn Elkay Water is expected to under-perform the Energy Recovery. But the stock apears to be less risky and, when comparing its historical volatility, Zurn Elkay Water is 1.36 times less risky than Energy Recovery. The stock trades about -0.11 of its potential returns per unit of risk. The Energy Recovery is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,472  in Energy Recovery on December 28, 2024 and sell it today you would earn a total of  146.00  from holding Energy Recovery or generate 9.92% return on investment over 90 days.

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

Zurn Elkay Water  vs.  Energy Recovery

Zurn Elkay Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zurn Elkay Water 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.

Energy Recovery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Recovery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Energy Recovery may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Zurn Elkay and Energy Recovery

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

The idea behind Zurn Elkay Water and Energy Recovery 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.