Correlation Between Vertiv Holdings and Ideal Power

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

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

Diversification Opportunities for Vertiv Holdings and Ideal Power

-0.78

Correlation Coefficient

Vertiv Holdings  Ideal Power

Pay attention - limited upside

The 3 months correlation between Vertiv and Ideal is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vertiv Holdings Co and Ideal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideal Power and Vertiv Holdings 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 Vertiv Holdings Co are associated (or correlated) with Ideal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideal Power has no effect on the direction of Vertiv Holdings i.e., Vertiv Holdings and Ideal Power go up and down completely randomly.

Pair Corralation between Vertiv Holdings and Ideal Power

Considering the 90-day investment horizon Vertiv Holdings Co is expected to under-perform the Ideal Power. But the stock apears to be less risky and, when comparing its historical volatility, Vertiv Holdings Co is 2.09 times less risky than Ideal Power. The stock trades about -0.11 of its potential returns per unit of risk. The Ideal Power is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  602.00  in Ideal Power on September 28, 2024 and sell it today you would earn a total of  148.00  from holding Ideal Power or generate 24.58% return on investment over 90 days.

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

Vertiv Holdings Co  vs.  Ideal Power

Vertiv Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vertiv Holdings Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vertiv Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ideal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Ideal Power is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vertiv Holdings and Ideal Power

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

The idea behind Vertiv Holdings Co and Ideal 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.