Correlation Between Powell Industries and Hollysys Automation

Can any of the company-specific risk be diversified away by investing in both Powell Industries and Hollysys Automation 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 Powell Industries and Hollysys Automation into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Powell Industries and Hollysys Automation

0.16

Correlation Coefficient

Powell Industries  Hollysys Automation

Average diversification

The 3 months correlation between Powell and Hollysys is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Powell Industries and Hollysys Automation Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollysys Automation and Powell Industries 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 Powell Industries are associated (or correlated) with Hollysys Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollysys Automation has no effect on the direction of Powell Industries i.e., Powell Industries and Hollysys Automation go up and down completely randomly.

Pair Corralation between Powell Industries and Hollysys Automation

If you would invest  15,248  in Powell Industries on September 2, 2024 and sell it today you would earn a total of  11,490  from holding Powell Industries or generate 75.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Powell Industries  vs.  Hollysys Automation Technologi

Powell Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Powell Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Powell Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Hollysys Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollysys Automation Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Hollysys Automation is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Powell Industries and Hollysys Automation

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

The idea behind Powell Industries and Hollysys Automation Technologies 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.