Correlation Between Eguana Technologies and Polar Power

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

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

Diversification Opportunities for Eguana Technologies and Polar Power

0.14

Correlation Coefficient

Eguana Technologies  Polar Power

Average diversification

The 3 months correlation between Eguana and Polar is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Eguana Technologies and Polar Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Power and Eguana Technologies 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 Eguana Technologies are associated (or correlated) with Polar Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Power has no effect on the direction of Eguana Technologies i.e., Eguana Technologies and Polar Power go up and down completely randomly.

Pair Corralation between Eguana Technologies and Polar Power

Assuming the 90 days horizon Eguana Technologies is expected to generate 2.92 times more return on investment than Polar Power. However, Eguana Technologies is 2.92 times more volatile than Polar Power. It trades about 0.14 of its potential returns per unit of risk. Polar Power is currently generating about 0.02 per unit of risk. If you would invest  0.46  in Eguana Technologies on September 14, 2024 and sell it today you would earn a total of  0.28  from holding Eguana Technologies or generate 60.87% return on investment over 90 days.

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

Eguana Technologies  vs.  Polar Power

Eguana Technologies

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eguana Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Eguana Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Polar Power

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Polar Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eguana Technologies and Polar Power

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

The idea behind Eguana Technologies and Polar Power 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 Transaction History module to view history of all your transactions and understand their impact on performance.