Correlation Between Vertiv Holdings and Pioneer Power

Can any of the company-specific risk be diversified away by investing in both Vertiv Holdings and Pioneer 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 Pioneer 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 Pioneer Power Solutions, you can compare the effects of market volatilities on Vertiv Holdings and Pioneer 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 Pioneer Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertiv Holdings and Pioneer Power.

Diversification Opportunities for Vertiv Holdings and Pioneer Power

0.85

Correlation Coefficient

Vertiv Holdings  Pioneer Power

Very poor diversification

The 3 months correlation between Vertiv and Pioneer is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vertiv Holdings Co and Pioneer Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Power Solutions 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 Pioneer Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Power Solutions has no effect on the direction of Vertiv Holdings i.e., Vertiv Holdings and Pioneer Power go up and down completely randomly.

Pair Corralation between Vertiv Holdings and Pioneer Power

Considering the 90-day investment horizon Vertiv Holdings Co is expected to generate 0.89 times more return on investment than Pioneer Power. However, Vertiv Holdings Co is 1.12 times less risky than Pioneer Power. It trades about 0.21 of its potential returns per unit of risk. Pioneer Power Solutions is currently generating about 0.15 per unit of risk. If you would invest  8,301  in Vertiv Holdings Co on August 30, 2024 and sell it today you would earn a total of  4,393  from holding Vertiv Holdings Co or generate 52.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Vertiv Holdings Co  vs.  Pioneer Power Solutions

Vertiv Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vertiv Holdings Co are ranked lower than 16 (%) 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.

Pioneer Power Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Power Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Pioneer Power demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vertiv Holdings and Pioneer Power

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

The idea behind Vertiv Holdings Co and Pioneer Power Solutions 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 Stocks Directory module to find actively traded stocks across global markets.