Correlation Between Power Solution and Qualitech Public

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

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

Diversification Opportunities for Power Solution and Qualitech Public

0.8

Correlation Coefficient

Power Solution  Qualitech Public

Very poor diversification

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

Pair Corralation between Power Solution and Qualitech Public

Assuming the 90 days trading horizon Power Solution is expected to generate 1.02 times less return on investment than Qualitech Public. In addition to that, Power Solution is 1.0 times more volatile than Qualitech Public. It trades about 0.05 of its total potential returns per unit of risk. Qualitech Public is currently generating about 0.06 per unit of volatility. If you would invest  296.00  in Qualitech Public on September 27, 2024 and sell it today you would lose (46.00) from holding Qualitech Public or give up 15.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.61%
Values	Daily Returns

Power Solution Technologies  vs.  Qualitech Public

Power Solution Techn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Solution Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Qualitech Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qualitech Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Qualitech Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Power Solution and Qualitech Public

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

The idea behind Power Solution Technologies and Qualitech Public 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.