Correlation Between Pioneer Power and Ocean Power

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Can any of the company-specific risk be diversified away by investing in both Pioneer Power and Ocean 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 Pioneer Power and Ocean Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pioneer Power Solutions and Ocean Power Technologies, you can compare the effects of market volatilities on Pioneer Power and Ocean 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 Pioneer Power with a short position of Ocean Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pioneer Power and Ocean Power.

Diversification Opportunities for Pioneer Power and Ocean Power

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Pioneer and Ocean is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Power Solutions and Ocean Power Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Power Technologies and Pioneer Power 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 Pioneer Power Solutions are associated (or correlated) with Ocean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Power Technologies has no effect on the direction of Pioneer Power i.e., Pioneer Power and Ocean Power go up and down completely randomly.

Pair Corralation between Pioneer Power and Ocean Power

Given the investment horizon of 90 days Pioneer Power is expected to generate 7.43 times less return on investment than Ocean Power. But when comparing it to its historical volatility, Pioneer Power Solutions is 6.22 times less risky than Ocean Power. It trades about 0.28 of its potential returns per unit of risk. Ocean Power Technologies is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Ocean Power Technologies on April 16, 2024 and sell it today you would earn a total of  26.00  from holding Ocean Power Technologies or generate 200.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Pioneer Power Solutions  vs.  Ocean Power Technologies

 Performance 
       Timeline  
Pioneer Power Solutions 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Power Solutions are ranked lower than 9 (%) 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.
Ocean Power Technologies 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Power Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Ocean Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pioneer Power and Ocean Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pioneer Power and Ocean Power

The main advantage of trading using opposite Pioneer Power and Ocean Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pioneer Power position performs unexpectedly, Ocean 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 Ocean Power will offset losses from the drop in Ocean Power's long position.
The idea behind Pioneer Power Solutions and Ocean Power 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.
Check out your portfolio center.
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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