Correlation Between Iterum Therapeutics and Pioneer Power

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

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

Diversification Opportunities for Iterum Therapeutics and Pioneer Power

0.4

Correlation Coefficient

Iterum Therapeutics  Pioneer Power

Very weak diversification

The 3 months correlation between Iterum and Pioneer is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Iterum Therapeutics PLC 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 Iterum Therapeutics 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 Iterum Therapeutics PLC 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 Iterum Therapeutics i.e., Iterum Therapeutics and Pioneer Power go up and down completely randomly.

Pair Corralation between Iterum Therapeutics and Pioneer Power

Given the investment horizon of 90 days Iterum Therapeutics PLC is expected to generate 1.5 times more return on investment than Pioneer Power. However, Iterum Therapeutics is 1.5 times more volatile than Pioneer Power Solutions. It trades about 0.06 of its potential returns per unit of risk. Pioneer Power Solutions is currently generating about 0.06 per unit of risk. If you would invest  82.00  in Iterum Therapeutics PLC on September 13, 2024 and sell it today you would earn a total of  148.00  from holding Iterum Therapeutics PLC or generate 180.49% return on investment over 90 days.

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

Iterum Therapeutics PLC  vs.  Pioneer Power Solutions

Iterum Therapeutics PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iterum Therapeutics PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Iterum Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pioneer Power Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Power Solutions are ranked lower than 7 (%) 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 Iterum Therapeutics and Pioneer Power

The main advantage of trading using opposite Iterum Therapeutics and Pioneer Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iterum Therapeutics 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 Iterum Therapeutics PLC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.