Correlation Between NVent Electric and Pioneer Power

Can any of the company-specific risk be diversified away by investing in both NVent Electric 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 NVent Electric and Pioneer 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 Pioneer Power Solutions, you can compare the effects of market volatilities on NVent Electric 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 NVent Electric with a short position of Pioneer Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVent Electric and Pioneer Power.

Diversification Opportunities for NVent Electric and Pioneer Power

0.89

Correlation Coefficient

NVent Electric  Pioneer Power

Very poor diversification

The 3 months correlation between NVent and Pioneer is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding nVent Electric 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 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 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 NVent Electric i.e., NVent Electric and Pioneer Power go up and down completely randomly.

Pair Corralation between NVent Electric and Pioneer Power

Considering the 90-day investment horizon nVent Electric PLC is expected to generate 1.07 times more return on investment than Pioneer Power. However, NVent Electric is 1.07 times more volatile than Pioneer Power Solutions. It trades about -0.12 of its potential returns per unit of risk. Pioneer Power Solutions is currently generating about -0.15 per unit of risk. If you would invest  6,818  in nVent Electric PLC on December 28, 2024 and sell it today you would lose (1,527) from holding nVent Electric PLC or give up 22.4% of portfolio value over 90 days.

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

nVent Electric PLC  vs.  Pioneer Power Solutions

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pioneer Power Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pioneer Power Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with NVent Electric and Pioneer Power

The main advantage of trading using opposite NVent Electric and Pioneer Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVent Electric 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 nVent Electric 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..