Correlation Between Prima Marine and Power Solution

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

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

Diversification Opportunities for Prima Marine and Power Solution

-0.05

Correlation Coefficient

Prima Marine  Power Solution

Good diversification

The 3 months correlation between Prima and Power is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Prima Marine Public and Power Solution Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Solution Techn and Prima Marine 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 Prima Marine Public are associated (or correlated) with Power Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Solution Techn has no effect on the direction of Prima Marine i.e., Prima Marine and Power Solution go up and down completely randomly.

Pair Corralation between Prima Marine and Power Solution

Assuming the 90 days trading horizon Prima Marine is expected to generate 147.07 times less return on investment than Power Solution. But when comparing it to its historical volatility, Prima Marine Public is 76.31 times less risky than Power Solution. It trades about 0.06 of its potential returns per unit of risk. Power Solution Technologies is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Power Solution Technologies on September 3, 2024 and sell it today you would earn a total of  43.00  from holding Power Solution Technologies or generate 9.223372036854776E16% return on investment over 90 days.

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

Prima Marine Public  vs.  Power Solution Technologies

Prima Marine Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prima Marine Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Prima Marine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Power Solution Techn

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Solution Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Power Solution disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prima Marine and Power Solution

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

The idea behind Prima Marine Public and Power Solution 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.