Correlation Between Polar Power and Orion Energy

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

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

Diversification Opportunities for Polar Power and Orion Energy

-0.01

Correlation Coefficient

Polar Power  Orion Energy

Good diversification

The 3 months correlation between Polar and Orion is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Polar Power and Orion Energy Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Energy Systems 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 Orion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Energy Systems has no effect on the direction of Polar Power i.e., Polar Power and Orion Energy go up and down completely randomly.

Pair Corralation between Polar Power and Orion Energy

Given the investment horizon of 90 days Polar Power is expected to generate 3.24 times more return on investment than Orion Energy. However, Polar Power is 3.24 times more volatile than Orion Energy Systems. It trades about 0.02 of its potential returns per unit of risk. Orion Energy Systems is currently generating about -0.01 per unit of risk. If you would invest  314.00  in Polar Power on September 4, 2024 and sell it today you would lose (16.00) from holding Polar Power or give up 5.1% of portfolio value over 90 days.

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

Polar Power  vs.  Orion Energy Systems

Polar Power

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Polar Power sustained solid returns over the last few months and may actually be approaching a breakup point.

Orion Energy Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orion Energy Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Orion Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Polar Power and Orion Energy

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

The idea behind Polar Power and Orion Energy Systems 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.