Correlation Between AdCapital and Power Integrations

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

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

Diversification Opportunities for AdCapital and Power Integrations

-0.61

Correlation Coefficient

AdCapital  Power Integrations

Excellent diversification

The 3 months correlation between AdCapital and Power is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding AdCapital AG and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations and AdCapital 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 AdCapital AG are associated (or correlated) with Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of AdCapital i.e., AdCapital and Power Integrations go up and down completely randomly.

Pair Corralation between AdCapital and Power Integrations

Assuming the 90 days horizon AdCapital AG is expected to under-perform the Power Integrations. In addition to that, AdCapital is 1.21 times more volatile than Power Integrations. It trades about -0.23 of its total potential returns per unit of risk. Power Integrations is currently generating about 0.05 per unit of volatility. If you would invest  5,780  in Power Integrations on October 6, 2024 and sell it today you would earn a total of  220.00  from holding Power Integrations or generate 3.81% return on investment over 90 days.

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

AdCapital AG  vs.  Power Integrations

AdCapital AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdCapital AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Power Integrations

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Integrations are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Power Integrations may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AdCapital and Power Integrations

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

The idea behind AdCapital AG and Power Integrations 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.