Correlation Between Advanced Energy and Pioneer Power

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

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

Diversification Opportunities for Advanced Energy and Pioneer Power

0.71

Correlation Coefficient

Advanced Energy  Pioneer Power

Poor diversification

The 3 months correlation between Advanced and Pioneer is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries 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 Advanced Energy 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 Advanced Energy Industries 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 Advanced Energy i.e., Advanced Energy and Pioneer Power go up and down completely randomly.

Pair Corralation between Advanced Energy and Pioneer Power

Given the investment horizon of 90 days Advanced Energy Industries is expected to generate 1.14 times more return on investment than Pioneer Power. However, Advanced Energy is 1.14 times more volatile than Pioneer Power Solutions. It trades about -0.08 of its potential returns per unit of risk. Pioneer Power Solutions is currently generating about -0.15 per unit of risk. If you would invest  11,494  in Advanced Energy Industries on December 30, 2024 and sell it today you would lose (2,014) from holding Advanced Energy Industries or give up 17.52% of portfolio value over 90 days.

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

Advanced Energy Industries  vs.  Pioneer Power Solutions

Advanced Energy Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Energy Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pioneer Power Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pioneer Power Solutions 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 fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Advanced Energy and Pioneer Power

The main advantage of trading using opposite Advanced Energy and Pioneer Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy 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 Advanced Energy Industries 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.