Correlation Between Power Financial and ACT Energy

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

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

Diversification Opportunities for Power Financial and ACT Energy

-0.49

Correlation Coefficient

Power Financial  ACT Energy

Very good diversification

The 3 months correlation between Power and ACT is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp and ACT Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACT Energy Technologies and Power Financial 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 Financial Corp are associated (or correlated) with ACT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACT Energy Technologies has no effect on the direction of Power Financial i.e., Power Financial and ACT Energy go up and down completely randomly.

Pair Corralation between Power Financial and ACT Energy

Assuming the 90 days trading horizon Power Financial Corp is expected to generate 0.31 times more return on investment than ACT Energy. However, Power Financial Corp is 3.18 times less risky than ACT Energy. It trades about 0.26 of its potential returns per unit of risk. ACT Energy Technologies is currently generating about -0.07 per unit of risk. If you would invest  2,073  in Power Financial Corp on April 21, 2025 and sell it today you would earn a total of  160.00  from holding Power Financial Corp or generate 7.72% return on investment over 90 days.

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

Power Financial Corp  vs.  ACT Energy Technologies

Power Financial Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Power Financial Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Power Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

ACT Energy Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days ACT Energy Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ACT Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Power Financial and ACT Energy

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

The idea behind Power Financial Corp and ACT Energy 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.