Correlation Between Pioneer Power and Advanced Energy

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

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

Diversification Opportunities for Pioneer Power and Advanced Energy

0.71

Correlation Coefficient

Pioneer Power  Advanced Energy

Poor diversification

The 3 months correlation between Pioneer and Advanced is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Power Solutions and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu and Pioneer 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 Pioneer Power Solutions are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of Pioneer Power i.e., Pioneer Power and Advanced Energy go up and down completely randomly.

Pair Corralation between Pioneer Power and Advanced Energy

Given the investment horizon of 90 days Pioneer Power Solutions is expected to under-perform the Advanced Energy. But the stock apears to be less risky and, when comparing its historical volatility, Pioneer Power Solutions is 1.14 times less risky than Advanced Energy. The stock trades about -0.15 of its potential returns per unit of risk. The Advanced Energy Industries is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  11,494  in Advanced Energy Industries on December 30, 2024 and sell it today you would lose (2,014) from holding Advanced Energy Industries or give up 17.52% of portfolio value over 90 days.

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

Pioneer Power Solutions  vs.  Advanced Energy Industries

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 April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Advanced Energy Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Energy Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Pioneer Power and Advanced Energy

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

The idea behind Pioneer Power Solutions and Advanced Energy Industries 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.