Correlation Between Advanced Energy and Signify NV

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

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

Diversification Opportunities for Advanced Energy and Signify NV

0.23

Correlation Coefficient

Advanced Energy  Signify NV

Modest diversification

The 3 months correlation between Advanced and Signify is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and Signify NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signify NV and Advanced Energy 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 Advanced Energy Industries are associated (or correlated) with Signify NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signify NV has no effect on the direction of Advanced Energy i.e., Advanced Energy and Signify NV go up and down completely randomly.

Pair Corralation between Advanced Energy and Signify NV

Given the investment horizon of 90 days Advanced Energy Industries is expected to under-perform the Signify NV. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Energy Industries is 1.6 times less risky than Signify NV. The stock trades about -0.12 of its potential returns per unit of risk. The Signify NV is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,648  in Signify NV on January 26, 2024 and sell it today you would earn a total of  412.00  from holding Signify NV or generate 15.56% return on investment over 90 days.

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

Advanced Energy Industries  vs.  Signify NV

Advanced Energy Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Energy Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Signify NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signify NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Signify NV is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Advanced Energy and Signify NV

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

The idea behind Advanced Energy Industries and Signify NV 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.