Correlation Between Acuity Brands and Plug Power

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

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

Diversification Opportunities for Acuity Brands and Plug Power

-0.37

Correlation Coefficient

Acuity Brands  Plug Power

Very good diversification

The 3 months correlation between Acuity and Plug is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Acuity Brands and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power and Acuity Brands 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 Acuity Brands are associated (or correlated) with Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of Acuity Brands i.e., Acuity Brands and Plug Power go up and down completely randomly.

Pair Corralation between Acuity Brands and Plug Power

Considering the 90-day investment horizon Acuity Brands is expected to generate 0.33 times more return on investment than Plug Power. However, Acuity Brands is 3.01 times less risky than Plug Power. It trades about -0.11 of its potential returns per unit of risk. Plug Power is currently generating about -0.13 per unit of risk. If you would invest  26,434  in Acuity Brands on February 4, 2024 and sell it today you would lose (993.00) from holding Acuity Brands or give up 3.76% of portfolio value over 90 days.

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

Acuity Brands  vs.  Plug Power

Acuity Brands

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acuity Brands are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Acuity Brands may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Plug Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plug Power 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 June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Acuity Brands and Plug Power

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

The idea behind Acuity Brands and Plug Power 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.