Correlation Between Power Floating and Power Global

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

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

Diversification Opportunities for Power Floating and Power Global

0.89

Correlation Coefficient

Power Floating  Power Global

Very poor diversification

The 3 months correlation between Power and Power is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Power Floating Rate and Power Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Global Tactical and Power Floating 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 Power Floating Rate are associated (or correlated) with Power Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Global Tactical has no effect on the direction of Power Floating i.e., Power Floating and Power Global go up and down completely randomly.

Pair Corralation between Power Floating and Power Global

Assuming the 90 days horizon Power Floating Rate is not expected to generate positive returns. However, Power Floating Rate is 6.42 times less risky than Power Global. It waists most of its returns potential to compensate for thr risk taken. Power Global is generating about 0.01 per unit of risk. If you would invest  1,057  in Power Global Tactical on December 27, 2024 and sell it today you would earn a total of  3.00  from holding Power Global Tactical or generate 0.28% return on investment over 90 days.

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

Power Floating Rate  vs.  Power Global Tactical

Power Floating Rate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Floating Rate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Power Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Power Global Tactical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Global Tactical has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Power Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Power Floating and Power Global

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

The idea behind Power Floating Rate and Power Global Tactical 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.