Correlation Between ADS TEC and Polar Power

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

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

Diversification Opportunities for ADS TEC and Polar Power

0.51

Correlation Coefficient

ADS TEC  Polar Power

Very weak diversification

The 3 months correlation between ADS and Polar is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ADS TEC ENERGY PLC and Polar Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Power and ADS TEC 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 ADS TEC ENERGY PLC are associated (or correlated) with Polar Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Power has no effect on the direction of ADS TEC i.e., ADS TEC and Polar Power go up and down completely randomly.

Pair Corralation between ADS TEC and Polar Power

Assuming the 90 days horizon ADS TEC is expected to generate 3.7 times less return on investment than Polar Power. But when comparing it to its historical volatility, ADS TEC ENERGY PLC is 1.19 times less risky than Polar Power. It trades about 0.01 of its potential returns per unit of risk. Polar Power is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  285.00  in Polar Power on December 24, 2024 and sell it today you would lose (12.00) from holding Polar Power or give up 4.21% of portfolio value over 90 days.

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

ADS TEC ENERGY PLC  vs.  Polar Power

ADS TEC ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADS TEC ENERGY PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, ADS TEC is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Polar Power

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Polar Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ADS TEC and Polar Power

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

The idea behind ADS TEC ENERGY PLC and Polar Power 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.