Correlation Between Power and EQB

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

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

Diversification Opportunities for Power and EQB

0.61

Correlation Coefficient

Power  EQB

Poor diversification

The 3 months correlation between Power and EQB is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Power and EQB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQB Inc and 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 Power are associated (or correlated) with EQB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQB Inc has no effect on the direction of Power i.e., Power and EQB go up and down completely randomly.

Pair Corralation between Power and EQB

Assuming the 90 days trading horizon Power is expected to generate 1.35 times less return on investment than EQB. But when comparing it to its historical volatility, Power is 1.48 times less risky than EQB. It trades about 0.14 of its potential returns per unit of risk. EQB Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,956  in EQB Inc on April 21, 2025 and sell it today you would earn a total of  1,251  from holding EQB Inc or generate 13.97% return on investment over 90 days.

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

Power  vs.  EQB Inc

Power

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Power may actually be approaching a critical reversion point that can send shares even higher in August 2025.

EQB Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EQB Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, EQB displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power and EQB

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

The idea behind Power and EQB Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.