Correlation Between Acuity Brands and Enersys

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

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

Diversification Opportunities for Acuity Brands and Enersys

-0.3

Correlation Coefficient

Acuity Brands  Enersys

Very good diversification

The 3 months correlation between Acuity and Enersys is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Acuity Brands and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys 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 Enersys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersys has no effect on the direction of Acuity Brands i.e., Acuity Brands and Enersys go up and down completely randomly.

Pair Corralation between Acuity Brands and Enersys

Considering the 90-day investment horizon Acuity Brands is expected to under-perform the Enersys. In addition to that, Acuity Brands is 1.34 times more volatile than Enersys. It trades about -0.15 of its total potential returns per unit of risk. Enersys is currently generating about -0.06 per unit of volatility. If you would invest  9,300  in Enersys on January 31, 2024 and sell it today you would lose (121.00) from holding Enersys or give up 1.3% 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.  Enersys

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 unsteady basic indicators, Acuity Brands may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Enersys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enersys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Enersys is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Acuity Brands and Enersys

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

The idea behind Acuity Brands and Enersys 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.