Correlation Between SCHMID Group and Power Solutions

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

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

Diversification Opportunities for SCHMID Group and Power Solutions

-0.5

Correlation Coefficient

SCHMID Group  Power Solutions

Very good diversification

The 3 months correlation between SCHMID and Power is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SCHMID Group NV and Power Solutions International, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Solutions Inte and SCHMID Group 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 SCHMID Group NV are associated (or correlated) with Power Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Solutions Inte has no effect on the direction of SCHMID Group i.e., SCHMID Group and Power Solutions go up and down completely randomly.

Pair Corralation between SCHMID Group and Power Solutions

Assuming the 90 days horizon SCHMID Group NV is expected to generate 2.53 times more return on investment than Power Solutions. However, SCHMID Group is 2.53 times more volatile than Power Solutions International,. It trades about 0.08 of its potential returns per unit of risk. Power Solutions International, is currently generating about 0.11 per unit of risk. If you would invest  23.00  in SCHMID Group NV on October 23, 2024 and sell it today you would earn a total of  2.00  from holding SCHMID Group NV or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	34.21%
Values	Daily Returns

SCHMID Group NV  vs.  Power Solutions International,

SCHMID Group NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SCHMID Group NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, SCHMID Group showed solid returns over the last few months and may actually be approaching a breakup point.

Power Solutions Inte

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Solutions International, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, Power Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCHMID Group and Power Solutions

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

The idea behind SCHMID Group NV and Power Solutions International, 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.