Correlation Between Polar Power and Ideal Power

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

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

Diversification Opportunities for Polar Power and Ideal Power

0.5

Correlation Coefficient

Polar Power  Ideal Power

Very weak diversification

The 3 months correlation between Polar and Ideal is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Polar Power and Ideal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideal Power and Polar 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 Polar Power 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 Polar Power i.e., Polar Power and Ideal Power go up and down completely randomly.

Pair Corralation between Polar Power and Ideal Power

Given the investment horizon of 90 days Polar Power is expected to generate 1.24 times more return on investment than Ideal Power. However, Polar Power is 1.24 times more volatile than Ideal Power. It trades about -0.08 of its potential returns per unit of risk. Ideal Power is currently generating about -0.33 per unit of risk. If you would invest  305.00  in Polar Power on November 28, 2024 and sell it today you would lose (25.00) from holding Polar Power or give up 8.2% of portfolio value over 90 days.

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

Polar Power  vs.  Ideal Power

Polar Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Polar Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the 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 Polar Power and Ideal Power

The main advantage of trading using opposite Polar Power and Ideal Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polar Power 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 Polar Power 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.