Correlation Between NVent Electric and Ideal Power

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

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

Diversification Opportunities for NVent Electric and Ideal Power

-0.06

Correlation Coefficient

NVent Electric  Ideal Power

Good diversification

The 3 months correlation between NVent and Ideal is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding nVent Electric PLC and Ideal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideal Power and NVent Electric 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 nVent Electric PLC are associated (or correlated) with Ideal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideal Power has no effect on the direction of NVent Electric i.e., NVent Electric and Ideal Power go up and down completely randomly.

Pair Corralation between NVent Electric and Ideal Power

Considering the 90-day investment horizon nVent Electric PLC is expected to under-perform the Ideal Power. But the stock apears to be less risky and, when comparing its historical volatility, nVent Electric PLC is 1.64 times less risky than Ideal Power. The stock trades about -0.15 of its potential returns per unit of risk. The Ideal Power is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  631.00  in Ideal Power on November 28, 2024 and sell it today you would lose (86.00) from holding Ideal Power or give up 13.63% of portfolio value over 90 days.

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

nVent Electric PLC  vs.  Ideal Power

nVent Electric PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days nVent Electric PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ideal Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with NVent Electric and Ideal Power

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

The idea behind nVent Electric PLC and Ideal 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 .