Correlation Between Pioneer Power and Energy Services

Can any of the company-specific risk be diversified away by investing in both Pioneer Power and Energy Services 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 Energy Services 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 Energy Services, you can compare the effects of market volatilities on Pioneer Power and Energy Services 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 Energy Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pioneer Power and Energy Services.

Diversification Opportunities for Pioneer Power and Energy Services

0.44

Correlation Coefficient

Pioneer Power  Energy Services

Very weak diversification

The 3 months correlation between Pioneer and Energy is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Power Solutions and Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Services 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 Energy Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Services has no effect on the direction of Pioneer Power i.e., Pioneer Power and Energy Services go up and down completely randomly.

Pair Corralation between Pioneer Power and Energy Services

Given the investment horizon of 90 days Pioneer Power Solutions is expected to under-perform the Energy Services. But the stock apears to be less risky and, when comparing its historical volatility, Pioneer Power Solutions is 1.38 times less risky than Energy Services. The stock trades about -0.01 of its potential returns per unit of risk. The Energy Services is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  597.00  in Energy Services on September 24, 2024 and sell it today you would earn a total of  1,003  from holding Energy Services or generate 168.01% return on investment over 90 days.

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

Pioneer Power Solutions  vs.  Energy Services

Pioneer Power Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Power Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Pioneer Power demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Energy Services

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Energy Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pioneer Power and Energy Services

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

The idea behind Pioneer Power Solutions and Energy Services 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.