Correlation Between Qualitech Public and Power Solution

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

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

Diversification Opportunities for Qualitech Public and Power Solution

0.8

Correlation Coefficient

Qualitech Public  Power Solution

Very poor diversification

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

Pair Corralation between Qualitech Public and Power Solution

Assuming the 90 days trading horizon Qualitech Public is expected to generate 1.06 times less return on investment than Power Solution. But when comparing it to its historical volatility, Qualitech Public is 1.14 times less risky than Power Solution. It trades about 0.3 of its potential returns per unit of risk. Power Solution Technologies is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Power Solution Technologies on September 27, 2024 and sell it today you would earn a total of  8.00  from holding Power Solution Technologies or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Qualitech Public  vs.  Power Solution Technologies

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.

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.

Pair Trading with Qualitech Public and Power Solution

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

The idea behind Qualitech Public and Power Solution Technologies 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.