Correlation Between Enersys and Veralto

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

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

Diversification Opportunities for Enersys and Veralto

0.56

Correlation Coefficient

Enersys  Veralto

Very weak diversification

The 3 months correlation between Enersys and Veralto is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Enersys and Veralto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veralto and Enersys 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 Enersys are associated (or correlated) with Veralto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veralto has no effect on the direction of Enersys i.e., Enersys and Veralto go up and down completely randomly.

Pair Corralation between Enersys and Veralto

Considering the 90-day investment horizon Enersys is expected to generate 1.49 times more return on investment than Veralto. However, Enersys is 1.49 times more volatile than Veralto. It trades about 0.0 of its potential returns per unit of risk. Veralto is currently generating about -0.05 per unit of risk. If you would invest  9,830  in Enersys on September 4, 2024 and sell it today you would lose (64.00) from holding Enersys or give up 0.65% of portfolio value over 90 days.

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

Enersys  vs.  Veralto

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Veralto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veralto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Veralto is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enersys and Veralto

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

The idea behind Enersys and Veralto 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.