Correlation Between Pioneer Power and ESS Tech

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

Diversification Opportunities for Pioneer Power and ESS Tech

0.35

Correlation Coefficient

Pioneer Power  ESS Tech

Weak diversification

The 3 months correlation between Pioneer and ESS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Power Solutions and ESS Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESS Tech 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 ESS Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESS Tech has no effect on the direction of Pioneer Power i.e., Pioneer Power and ESS Tech go up and down completely randomly.

Pair Corralation between Pioneer Power and ESS Tech

Given the investment horizon of 90 days Pioneer Power Solutions is expected to generate 0.69 times more return on investment than ESS Tech. However, Pioneer Power Solutions is 1.45 times less risky than ESS Tech. It trades about 0.03 of its potential returns per unit of risk. ESS Tech is currently generating about -0.05 per unit of risk. If you would invest  520.00  in Pioneer Power Solutions on September 17, 2024 and sell it today you would earn a total of  61.00  from holding Pioneer Power Solutions or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.66%
Values	Daily Returns

Pioneer Power Solutions  vs.  ESS Tech

Pioneer Power Solutions

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Power Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Pioneer Power demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ESS Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESS Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ESS Tech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Pioneer Power and ESS Tech

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

The idea behind Pioneer Power Solutions and ESS Tech 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.