Correlation Between Powell Industries and Pioneer Power

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

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

Diversification Opportunities for Powell Industries and Pioneer Power

0.69

Correlation Coefficient

Powell Industries  Pioneer Power

Poor diversification

The 3 months correlation between Powell and Pioneer is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Powell Industries 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 Powell Industries 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 Powell Industries 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 Powell Industries i.e., Powell Industries and Pioneer Power go up and down completely randomly.

Pair Corralation between Powell Industries and Pioneer Power

Given the investment horizon of 90 days Powell Industries is expected to under-perform the Pioneer Power. But the stock apears to be less risky and, when comparing its historical volatility, Powell Industries is 1.01 times less risky than Pioneer Power. The stock trades about -0.55 of its potential returns per unit of risk. The Pioneer Power Solutions is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  386.00  in Pioneer Power Solutions on November 28, 2024 and sell it today you would lose (25.00) from holding Pioneer Power Solutions or give up 6.48% of portfolio value over 90 days.

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

Powell Industries  vs.  Pioneer Power Solutions

Powell Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powell Industries 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 quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Powell Industries and Pioneer Power

The main advantage of trading using opposite Powell Industries and Pioneer Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Powell Industries 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 Powell Industries 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.