Correlation Between ESS Tech and Pioneer Power

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

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

Diversification Opportunities for ESS Tech and Pioneer Power

0.35

Correlation Coefficient

ESS Tech  Pioneer Power

Weak diversification

The 3 months correlation between ESS and Pioneer is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ESS Tech 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 ESS Tech 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 ESS Tech 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 ESS Tech i.e., ESS Tech and Pioneer Power go up and down completely randomly.

Pair Corralation between ESS Tech and Pioneer Power

Considering the 90-day investment horizon ESS Tech is expected to generate 6.53 times less return on investment than Pioneer Power. In addition to that, ESS Tech is 1.95 times more volatile than Pioneer Power Solutions. It trades about 0.01 of its total potential returns per unit of risk. Pioneer Power Solutions is currently generating about 0.11 per unit of volatility. If you would invest  472.00  in Pioneer Power Solutions on September 16, 2024 and sell it today you would earn a total of  109.00  from holding Pioneer Power Solutions or generate 23.09% return on investment over 90 days.

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

ESS Tech  vs.  Pioneer Power Solutions

ESS Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESS Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ESS Tech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pioneer Power Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Power Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Pioneer Power demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESS Tech and Pioneer Power

The main advantage of trading using opposite ESS Tech and Pioneer Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESS Tech 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 ESS Tech 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.