Can any of the company-specific risk be diversified away by investing in both Electrovaya Common 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 Electrovaya Common and Acuity Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electrovaya Common Shares and Acuity Brands, you can compare the effects of market volatilities on Electrovaya Common 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 Electrovaya Common with a short position of Acuity Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electrovaya Common and Acuity Brands.
Diversification Opportunities for Electrovaya Common and Acuity Brands
The 3 months correlation between Electrovaya and Acuity is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Electrovaya Common Shares and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and Electrovaya Common 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 Electrovaya Common Shares 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 Electrovaya Common i.e., Electrovaya Common and Acuity Brands go up and down completely randomly.
Pair Corralation between Electrovaya Common and Acuity Brands
Given the investment horizon of 90 days Electrovaya Common Shares is expected to generate 2.99 times more return on investment than Acuity Brands. However, Electrovaya Common is 2.99 times more volatile than Acuity Brands. It trades about 0.1 of its potential returns per unit of risk. Acuity Brands is currently generating about 0.06 per unit of risk. If you would invest 254.00 in Electrovaya Common Shares on September 9, 2023 and sell it today you would earn a total of 47.00 from holding Electrovaya Common Shares or generate 18.5% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Electrovaya Common Shares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Electrovaya Common is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Acuity Brands are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Acuity Brands demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Electrovaya Common and Acuity Brands Volatility Contrast
Predicted Return Density
Pair Trading with Electrovaya Common and Acuity Brands
The main advantage of trading using opposite Electrovaya Common and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electrovaya Common 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 Electrovaya Common Shares 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.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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