Correlation Between Solid Power and Pioneer Power

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

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

Diversification Opportunities for Solid Power and Pioneer Power

-0.71

Correlation Coefficient

Solid Power  Pioneer Power

Pay attention - limited upside

The 3 months correlation between Solid and Pioneer is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Solid Power and Pioneer Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Power Solutions and Solid 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 Solid Power are associated (or correlated) with Pioneer Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Power Solutions has no effect on the direction of Solid Power i.e., Solid Power and Pioneer Power go up and down completely randomly.

Pair Corralation between Solid Power and Pioneer Power

Given the investment horizon of 90 days Solid Power is expected to under-perform the Pioneer Power. But the stock apears to be less risky and, when comparing its historical volatility, Solid Power is 1.14 times less risky than Pioneer Power. The stock trades about -0.05 of its potential returns per unit of risk. The Pioneer Power Solutions is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  420.00  in Pioneer Power Solutions on September 3, 2024 and sell it today you would earn a total of  175.00  from holding Pioneer Power Solutions or generate 41.67% return on investment over 90 days.

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

Solid Power  vs.  Pioneer Power Solutions

Solid Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pioneer Power Solutions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Power Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Pioneer Power demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solid Power and Pioneer Power

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

The idea behind Solid Power and Pioneer Power Solutions 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.