Correlation Between Polar Power and Energy Services

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

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

Diversification Opportunities for Polar Power and Energy Services

-0.63

Correlation Coefficient

Polar Power  Energy Services

Excellent diversification

The 3 months correlation between Polar and Energy is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Polar Power and Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Services and Polar 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 Polar Power are associated (or correlated) with Energy Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Services has no effect on the direction of Polar Power i.e., Polar Power and Energy Services go up and down completely randomly.

Pair Corralation between Polar Power and Energy Services

Given the investment horizon of 90 days Polar Power is expected to under-perform the Energy Services. In addition to that, Polar Power is 1.2 times more volatile than Energy Services. It trades about -0.01 of its total potential returns per unit of risk. Energy Services is currently generating about 0.09 per unit of volatility. If you would invest  252.00  in Energy Services on September 25, 2024 and sell it today you would earn a total of  1,184  from holding Energy Services or generate 469.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Polar Power  vs.  Energy Services

Polar Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polar Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Polar Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Energy Services

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Energy Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polar Power and Energy Services

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

The idea behind Polar Power and Energy Services 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.