Correlation Between Pioneer Power and Iterum Therapeutics

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

Diversification Opportunities for Pioneer Power and Iterum Therapeutics

0.4

Correlation Coefficient

Pioneer Power  Iterum Therapeutics

Very weak diversification

The 3 months correlation between Pioneer and Iterum is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Power Solutions and Iterum Therapeutics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iterum Therapeutics PLC 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 Iterum Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iterum Therapeutics PLC has no effect on the direction of Pioneer Power i.e., Pioneer Power and Iterum Therapeutics go up and down completely randomly.

Pair Corralation between Pioneer Power and Iterum Therapeutics

Given the investment horizon of 90 days Pioneer Power is expected to generate 3.77 times less return on investment than Iterum Therapeutics. But when comparing it to its historical volatility, Pioneer Power Solutions is 2.85 times less risky than Iterum Therapeutics. It trades about 0.11 of its potential returns per unit of risk. Iterum Therapeutics PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Iterum Therapeutics PLC on September 14, 2024 and sell it today you would earn a total of  92.00  from holding Iterum Therapeutics PLC or generate 86.79% 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.  Iterum Therapeutics PLC

Pioneer Power Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Power Solutions are ranked lower than 8 (%) 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.

Iterum Therapeutics PLC

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iterum Therapeutics PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Iterum Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pioneer Power and Iterum Therapeutics

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

The idea behind Pioneer Power Solutions and Iterum Therapeutics PLC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.