Correlation Between Ideal Power and Enersys

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

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

Diversification Opportunities for Ideal Power and Enersys

0.73

Correlation Coefficient

Ideal Power  Enersys

Poor diversification

The 3 months correlation between Ideal and Enersys is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ideal Power and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys and Ideal Power 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 Ideal Power 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 Ideal Power i.e., Ideal Power and Enersys go up and down completely randomly.

Pair Corralation between Ideal Power and Enersys

Given the investment horizon of 90 days Ideal Power is expected to under-perform the Enersys. In addition to that, Ideal Power is 2.86 times more volatile than Enersys. It trades about -0.03 of its total potential returns per unit of risk. Enersys is currently generating about -0.07 per unit of volatility. If you would invest  9,924  in Enersys on September 25, 2024 and sell it today you would lose (753.00) from holding Enersys or give up 7.59% of portfolio value over 90 days.

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

Ideal Power  vs.  Enersys

Ideal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ideal Power and Enersys

The main advantage of trading using opposite Ideal Power and Enersys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ideal Power 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 Ideal Power 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.