Correlation Between Plug Power and Techtronic Industries

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

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

Diversification Opportunities for Plug Power and Techtronic Industries

-0.07

Correlation Coefficient

Plug Power  Techtronic Industries

Good diversification

The 3 months correlation between Plug and Techtronic is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Techtronic Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techtronic Industries and Plug 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 Plug Power are associated (or correlated) with Techtronic Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techtronic Industries has no effect on the direction of Plug Power i.e., Plug Power and Techtronic Industries go up and down completely randomly.

Pair Corralation between Plug Power and Techtronic Industries

Given the investment horizon of 90 days Plug Power is expected to under-perform the Techtronic Industries. In addition to that, Plug Power is 2.8 times more volatile than Techtronic Industries Ltd. It trades about -0.13 of its total potential returns per unit of risk. Techtronic Industries Ltd is currently generating about -0.06 per unit of volatility. If you would invest  6,566  in Techtronic Industries Ltd on December 30, 2024 and sell it today you would lose (518.00) from holding Techtronic Industries Ltd or give up 7.89% of portfolio value over 90 days.

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

Plug Power  vs.  Techtronic Industries Ltd

Plug Power

Risk-Adjusted Performance

Very Weak

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

Techtronic Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Techtronic Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Plug Power and Techtronic Industries

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

The idea behind Plug Power and Techtronic Industries Ltd 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.

Check out your portfolio center.

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.