Correlation Between Enerpac Tool and Gates Industrial

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

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

Diversification Opportunities for Enerpac Tool and Gates Industrial

0.92

Correlation Coefficient

Enerpac Tool  Gates Industrial

Almost no diversification

The 3 months correlation between Enerpac and Gates is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Enerpac Tool Group and Gates Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gates Industrial and Enerpac Tool 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 Enerpac Tool Group are associated (or correlated) with Gates Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gates Industrial has no effect on the direction of Enerpac Tool i.e., Enerpac Tool and Gates Industrial go up and down completely randomly.

Pair Corralation between Enerpac Tool and Gates Industrial

Given the investment horizon of 90 days Enerpac Tool is expected to generate 1.05 times less return on investment than Gates Industrial. But when comparing it to its historical volatility, Enerpac Tool Group is 1.01 times less risky than Gates Industrial. It trades about 0.08 of its potential returns per unit of risk. Gates Industrial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,127  in Gates Industrial on September 14, 2024 and sell it today you would earn a total of  1,074  from holding Gates Industrial or generate 95.25% return on investment over 90 days.

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

Enerpac Tool Group  vs.  Gates Industrial

Enerpac Tool Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enerpac Tool Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enerpac Tool exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gates Industrial

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gates Industrial are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Gates Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enerpac Tool and Gates Industrial

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

The idea behind Enerpac Tool Group and Gates Industrial 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.