Correlation Between Pioneer Power and Plug Power

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

Diversification Opportunities for Pioneer Power and Plug Power

0.8

Correlation Coefficient

Pioneer Power  Plug Power

Very poor diversification

The 3 months correlation between Pioneer and Plug is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Power Solutions and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power 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 Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of Pioneer Power i.e., Pioneer Power and Plug Power go up and down completely randomly.

Pair Corralation between Pioneer Power and Plug Power

Given the investment horizon of 90 days Pioneer Power Solutions is expected to generate 0.5 times more return on investment than Plug Power. However, Pioneer Power Solutions is 1.98 times less risky than Plug Power. It trades about -0.15 of its potential returns per unit of risk. Plug Power is currently generating about -0.11 per unit of risk. If you would invest  415.00  in Pioneer Power Solutions on December 28, 2024 and sell it today you would lose (99.00) from holding Pioneer Power Solutions or give up 23.86% of portfolio value over 90 days.

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

Pioneer Power Solutions  vs.  Plug Power

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.

Plug Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plug Power 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 nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Pioneer Power and Plug Power

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

The idea behind Pioneer Power Solutions and Plug Power 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.