Correlation Between Eos Energy and Polar Power

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

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

Diversification Opportunities for Eos Energy and Polar Power

0.57

Correlation Coefficient

Eos Energy  Polar Power

Very weak diversification

The 3 months correlation between Eos and Polar is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Eos Energy Enterprises and Polar Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Power and Eos 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 Eos Energy Enterprises 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 Eos Energy i.e., Eos Energy and Polar Power go up and down completely randomly.

Pair Corralation between Eos Energy and Polar Power

Given the investment horizon of 90 days Eos Energy Enterprises is expected to under-perform the Polar Power. But the stock apears to be less risky and, when comparing its historical volatility, Eos Energy Enterprises is 1.01 times less risky than Polar Power. The stock trades about -0.03 of its potential returns per unit of risk. The Polar Power is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  278.00  in Polar Power on December 27, 2024 and sell it today you would lose (24.00) from holding Polar Power or give up 8.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Eos Energy Enterprises  vs.  Polar Power

Eos Energy Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eos Energy Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Polar Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Polar Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eos Energy and Polar Power

The main advantage of trading using opposite Eos Energy and Polar Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eos Energy 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 Eos Energy Enterprises 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .