Correlation Between Polar Power and ITM Power

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

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

Diversification Opportunities for Polar Power and ITM Power

-0.31

Correlation Coefficient

Polar Power  ITM Power

Very good diversification

The 3 months correlation between Polar and ITM is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Polar Power and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc and Polar 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 Polar Power are associated (or correlated) with ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of Polar Power i.e., Polar Power and ITM Power go up and down completely randomly.

Pair Corralation between Polar Power and ITM Power

Given the investment horizon of 90 days Polar Power is expected to under-perform the ITM Power. But the stock apears to be less risky and, when comparing its historical volatility, Polar Power is 2.54 times less risky than ITM Power. The stock trades about -0.02 of its potential returns per unit of risk. The ITM Power Plc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  43.00  in ITM Power Plc on May 5, 2025 and sell it today you would earn a total of  36.00  from holding ITM Power Plc or generate 83.72% return on investment over 90 days.

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

Polar Power  vs.  ITM Power Plc

Polar Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Polar Power is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ITM Power Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ITM Power Plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITM Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polar Power and ITM Power

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

The idea behind Polar Power and ITM Power Plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.