Correlation Between Power Solutions and Theglobe

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

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

Diversification Opportunities for Power Solutions and Theglobe

-0.29

Correlation Coefficient

Power Solutions  Theglobe

Very good diversification

The 3 months correlation between Power and Theglobe is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Power Solutions International and theglobe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on theglobe and Power Solutions 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 Power Solutions International are associated (or correlated) with Theglobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of theglobe has no effect on the direction of Power Solutions i.e., Power Solutions and Theglobe go up and down completely randomly.

Pair Corralation between Power Solutions and Theglobe

If you would invest  23.00  in theglobe on September 29, 2024 and sell it today you would earn a total of  0.00  from holding theglobe or generate 0.0% return on investment over 90 days.

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

Power Solutions International  vs.  theglobe

Power Solutions Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Solutions International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Power Solutions is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

theglobe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days theglobe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Theglobe is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Power Solutions and Theglobe

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

The idea behind Power Solutions International and theglobe 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.