Correlation Between Prodigy Public and Power Solution

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

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

Diversification Opportunities for Prodigy Public and Power Solution

-0.03

Correlation Coefficient

Prodigy Public  Power Solution

Good diversification

The 3 months correlation between Prodigy and Power is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Prodigy Public and Power Solution Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Solution Techn and Prodigy Public 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 Prodigy Public are associated (or correlated) with Power Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Solution Techn has no effect on the direction of Prodigy Public i.e., Prodigy Public and Power Solution go up and down completely randomly.

Pair Corralation between Prodigy Public and Power Solution

Assuming the 90 days trading horizon Prodigy Public is expected to under-perform the Power Solution. But the stock apears to be less risky and, when comparing its historical volatility, Prodigy Public is 1.81 times less risky than Power Solution. The stock trades about -0.11 of its potential returns per unit of risk. The Power Solution Technologies is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Power Solution Technologies on October 15, 2024 and sell it today you would earn a total of  6.00  from holding Power Solution Technologies or generate 14.29% return on investment over 90 days.

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

Prodigy Public  vs.  Power Solution Technologies

Prodigy Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prodigy Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Prodigy Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Power Solution Techn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Solution Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Power Solution is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Prodigy Public and Power Solution

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

The idea behind Prodigy Public and Power Solution Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.