Correlation Between Power Solution and Prima Marine

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Can any of the company-specific risk be diversified away by investing in both Power Solution and Prima Marine 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 Prima Marine 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 Prima Marine Public, you can compare the effects of market volatilities on Power Solution and Prima Marine 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 Prima Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Solution and Prima Marine.

Diversification Opportunities for Power Solution and Prima Marine

-0.05
  Correlation Coefficient

Good diversification

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

Pair Corralation between Power Solution and Prima Marine

Assuming the 90 days trading horizon Power Solution Technologies is expected to generate 76.31 times more return on investment than Prima Marine. However, Power Solution is 76.31 times more volatile than Prima Marine Public. It trades about 0.12 of its potential returns per unit of risk. Prima Marine Public is currently generating about 0.06 per unit of risk. 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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Power Solution Technologies  vs.  Prima Marine Public

 Performance 
       Timeline  
Power Solution Techn 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
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.
Prima Marine Public 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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 and Prima Marine Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Power Solution and Prima Marine

The main advantage of trading using opposite Power Solution and Prima Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Solution position performs unexpectedly, Prima Marine 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 Prima Marine will offset losses from the drop in Prima Marine's long position.
The idea behind Power Solution Technologies and Prima Marine Public 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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