Correlation Between Voltronic Power and Advanced Energy

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

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

Diversification Opportunities for Voltronic Power and Advanced Energy

-0.61

Correlation Coefficient

Voltronic Power  Advanced Energy

Excellent diversification

The 3 months correlation between Voltronic and Advanced is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Voltronic Power Technology and Advanced Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Solution and Voltronic 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 Voltronic Power Technology are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Solution has no effect on the direction of Voltronic Power i.e., Voltronic Power and Advanced Energy go up and down completely randomly.

Pair Corralation between Voltronic Power and Advanced Energy

Assuming the 90 days trading horizon Voltronic Power Technology is expected to under-perform the Advanced Energy. But the stock apears to be less risky and, when comparing its historical volatility, Voltronic Power Technology is 1.14 times less risky than Advanced Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Advanced Energy Solution is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  50,000  in Advanced Energy Solution on September 3, 2024 and sell it today you would earn a total of  38,000  from holding Advanced Energy Solution or generate 76.0% return on investment over 90 days.

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

Voltronic Power Technology  vs.  Advanced Energy Solution

Voltronic Power Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voltronic Power Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Advanced Energy Solution

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Solution are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Voltronic Power and Advanced Energy

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

The idea behind Voltronic Power Technology and Advanced Energy Solution 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.