Correlation Between Plug Power and Powerstorm Holdings

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

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

Diversification Opportunities for Plug Power and Powerstorm Holdings

-0.06

Correlation Coefficient

Plug Power  Powerstorm Holdings

Good diversification

The 3 months correlation between Plug and Powerstorm is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Powerstorm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerstorm Holdings 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 Powerstorm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerstorm Holdings has no effect on the direction of Plug Power i.e., Plug Power and Powerstorm Holdings go up and down completely randomly.

Pair Corralation between Plug Power and Powerstorm Holdings

Given the investment horizon of 90 days Plug Power is expected to generate 1.33 times less return on investment than Powerstorm Holdings. But when comparing it to its historical volatility, Plug Power is 1.15 times less risky than Powerstorm Holdings. It trades about 0.1 of its potential returns per unit of risk. Powerstorm Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.14  in Powerstorm Holdings on September 26, 2024 and sell it today you would earn a total of  0.16  from holding Powerstorm Holdings or generate 14.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Plug Power  vs.  Powerstorm Holdings

Plug Power

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 5 (%) 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.

Powerstorm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerstorm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Plug Power and Powerstorm Holdings

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

The idea behind Plug Power and Powerstorm Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.