Correlation Between Drone Delivery and Acuity Brands

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

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

Diversification Opportunities for Drone Delivery and Acuity Brands

0.82

Correlation Coefficient

Drone Delivery  Acuity Brands

Very poor diversification

The 3 months correlation between Drone and Acuity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Drone Delivery Canada and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and Drone Delivery 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 Drone Delivery Canada 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 Drone Delivery i.e., Drone Delivery and Acuity Brands go up and down completely randomly.

Pair Corralation between Drone Delivery and Acuity Brands

If you would invest  24,597  in Acuity Brands on September 2, 2024 and sell it today you would earn a total of  7,472  from holding Acuity Brands or generate 30.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

Drone Delivery Canada  vs.  Acuity Brands

Drone Delivery Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Drone Delivery Canada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Drone Delivery is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Acuity Brands

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Acuity Brands are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Acuity Brands demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Drone Delivery and Acuity Brands

The main advantage of trading using opposite Drone Delivery and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Drone Delivery 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 Drone Delivery Canada 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.