Correlation Between Power Solution and Grande Asset

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

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

Diversification Opportunities for Power Solution and Grande Asset

0.76

Correlation Coefficient

Power Solution  Grande Asset

Poor diversification

The 3 months correlation between Power and Grande is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Power Solution Technologies and Grande Asset Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grande Asset Hotels and Power Solution 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 Power Solution Technologies are associated (or correlated) with Grande Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grande Asset Hotels has no effect on the direction of Power Solution i.e., Power Solution and Grande Asset go up and down completely randomly.

Pair Corralation between Power Solution and Grande Asset

Assuming the 90 days trading horizon Power Solution Technologies is expected to under-perform the Grande Asset. But the stock apears to be less risky and, when comparing its historical volatility, Power Solution Technologies is 2.87 times less risky than Grande Asset. The stock trades about -0.18 of its potential returns per unit of risk. The Grande Asset Hotels is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Grande Asset Hotels on September 15, 2024 and sell it today you would lose (2.00) from holding Grande Asset Hotels or give up 20.0% of portfolio value over 90 days.

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

Power Solution Technologies  vs.  Grande Asset Hotels

Power Solution Techn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Solution Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Grande Asset Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grande Asset Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Power Solution and Grande Asset

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

The idea behind Power Solution Technologies and Grande Asset Hotels 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.