Correlation Between Plug Power and Powercell Sweden

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

By analyzing existing cross correlation between Plug Power and Powercell Sweden, you can compare the effects of market volatilities on Plug Power and Powercell Sweden 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 Powercell Sweden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plug Power and Powercell Sweden.

Diversification Opportunities for Plug Power and Powercell Sweden

0.59

Correlation Coefficient

Plug Power  Powercell Sweden

Very weak diversification

The 3 months correlation between Plug and Powercell is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Powercell Sweden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powercell Sweden 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 Powercell Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powercell Sweden has no effect on the direction of Plug Power i.e., Plug Power and Powercell Sweden go up and down completely randomly.

Pair Corralation between Plug Power and Powercell Sweden

Assuming the 90 days trading horizon Plug Power is expected to generate 1.02 times less return on investment than Powercell Sweden. But when comparing it to its historical volatility, Plug Power is 1.06 times less risky than Powercell Sweden. It trades about 0.12 of its potential returns per unit of risk. Powercell Sweden is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  218.00  in Powercell Sweden on September 4, 2024 and sell it today you would earn a total of  85.00  from holding Powercell Sweden or generate 38.99% return on investment over 90 days.

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

Plug Power  vs.  Powercell Sweden

Plug Power

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Plug Power reported solid returns over the last few months and may actually be approaching a breakup point.

Powercell Sweden

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Powercell Sweden are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Powercell Sweden reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plug Power and Powercell Sweden

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

The idea behind Plug Power and Powercell Sweden 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.