Correlation Between Maxim Power and Orsted AS

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

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

Diversification Opportunities for Maxim Power and Orsted AS

-0.86

Correlation Coefficient

Maxim Power  Orsted AS

Pay attention - limited upside

The 3 months correlation between Maxim and Orsted is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Maxim Power Corp and Orsted AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS and Maxim Power 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 Maxim Power Corp are associated (or correlated) with Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS has no effect on the direction of Maxim Power i.e., Maxim Power and Orsted AS go up and down completely randomly.

Pair Corralation between Maxim Power and Orsted AS

Assuming the 90 days horizon Maxim Power Corp is expected to generate 1.43 times more return on investment than Orsted AS. However, Maxim Power is 1.43 times more volatile than Orsted AS. It trades about 0.27 of its potential returns per unit of risk. Orsted AS is currently generating about -0.14 per unit of risk. If you would invest  346.00  in Maxim Power Corp on October 8, 2024 and sell it today you would earn a total of  75.00  from holding Maxim Power Corp or generate 21.68% return on investment over 90 days.

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

Maxim Power Corp  vs.  Orsted AS

Maxim Power Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maxim Power Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Maxim Power reported solid returns over the last few months and may actually be approaching a breakup point.

Orsted AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orsted AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Maxim Power and Orsted AS

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

The idea behind Maxim Power Corp and Orsted AS 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..