Correlation Between Plug Power and Enersys

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

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

Diversification Opportunities for Plug Power and Enersys

0.32

Correlation Coefficient

Plug Power  Enersys

Weak diversification

The 3 months correlation between Plug and Enersys is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys and Plug 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 Plug 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 Plug Power i.e., Plug Power and Enersys go up and down completely randomly.

Pair Corralation between Plug Power and Enersys

Given the investment horizon of 90 days Plug Power is expected to under-perform the Enersys. In addition to that, Plug Power is 3.63 times more volatile than Enersys. It trades about -0.07 of its total potential returns per unit of risk. Enersys is currently generating about -0.05 per unit of volatility. If you would invest  9,909  in Enersys on September 6, 2024 and sell it today you would lose (248.00) from holding Enersys or give up 2.5% of portfolio value over 90 days.

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

Plug Power  vs.  Enersys

Plug Power

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Plug Power reported solid returns over the last few months and may actually be approaching a breakup point.

Enersys

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enersys are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Plug Power and Enersys

The main advantage of trading using opposite Plug Power and Enersys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plug 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 Plug 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.